Sports Sentiment and Stock Returns

This paper investigates the stock market reaction to sudden changes in investor mood. Motivated by psychological evidence of a strong link between soccer outcomes and mood, we use international soccer results as our primary mood variable. We find a significant market decline after soccer losses. For...

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Bibliographic Details
Published in:The Journal of finance (New York) 2007-08, Vol.62 (4), p.1967-1998
Main Authors: EDMANS, ALEX, GARCÍA, DIEGO, NORLI, ØYVIND
Format: Article
Language:English
Subjects:
Basketball
Countries
Cricket
Economic psychology
Football
Games
Investment analysis
Investors
Mood
Portfolio management
Rates of return
Rugby
Securities markets
Soccer
Sports
Stock market indices
Stock markets
Stock returns
Studies
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Summary:This paper investigates the stock market reaction to sudden changes in investor mood. Motivated by psychological evidence of a strong link between soccer outcomes and mood, we use international soccer results as our primary mood variable. We find a significant market decline after soccer losses. For example, a loss in the World Cup elimination stage leads to a next-day abnormal stock return of -49 basis points. This loss effect is stronger in small stocks and in more important games, and is robust to methodological changes. We also document a loss effect after international cricket, rugby, and basketball games.
ISSN:0022-1082
1540-6261
DOI:10.1111/j.1540-6261.2007.01262.x