Football and the stock market

Research shows that results in international football matches can influence returns on national stock indexes.

The study examines how the stock market reacts to sudden shifts in the mood of investors. Motivated by a wide range of studies in psychology that document a strong relation between sports results and mood, it investigates the relation between results in international football matches and returns on national stock indexes in 39 countries.

The most important finding in the study is that a defeat in an international football match leads to a dramatic fall in the stock market. A defeat in the World Cup final will on average cause a fall of 0.38% in the main share index of a defeated country. The defeat-effect is both economically and statistically significant. Converted to monthly returns, the fall represents an average of 7%. The study also documents an equivalent defeat-effect in other important international sports.

A sudden fall in the stock market can be understood as a result of how investors perceive the future. Being defeated in an important international football match creates a general pessimism among the residents of a country. A more pessimistic investor would naturally reconsider how much listed companies are worth.

Below you can read the full article originally published in The Journal of Finance.   

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