FIFA World Cup Match Outcomes and Stock Market Returns


Topics: Stock market, FIFA World Cup, Stock market index Pages: 28 (6359 words) Published: November 26, 2014
FIFA World Cup Match
Outcomes and Stock
Market Returns


Prepared For: Prof. Jeffery Cao"

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Prepared By:"
Kara "
Shwe Yee Win (G1089264W)"
Stefanie"

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Table of Contents
Abstract"

3"

Introduction"

3"

Motivation and Theoretical Background"

3"

Data Sources and Methodology"

4"

Event Study"

7"

Motivation"

7"

Methodology"

7"

Results and Analysis "

9"

Implications and further analysis"

Regression"

14"

15"

Motivation"

15"

Data Set"

15"

Results and Analysis"

16"

Implications and further analysis"

21"

Limitations"

21"

Conclusion"

22"

References"

23"

Appendix"

24

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Abstract!
" Numerous studies have documented how investor sentiment can greatly impact stock returns. Among these studies, some papers have established a strong correlation between the results of soccer matches and investors’ sentiments (Scholtens & Peenstra, 2009); Edmans, Garcia & Norli, 2007; Kaplanski, & Levy, 2010). Other papers have argued that this effect is either insignificant or undocumented (Gerlach, 2011). Intrigued by this novel relationship, we decided to analyse the results of FIFA matches and the performance of the stock market through methods that were initially unexplored: (1) event study and (2) regression analysis. We analysed 7 World Cup years, consisting of 134 FIFA matches with 24 countries’ historical stock returns. Contrary to most of the prior studies’ findings, our results indicate that there is no strong relation between the results of soccer matches and the stock returns. "

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Introduction!
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The subject of sports and its effects on financial markets has received considerable

attention in academic research as an example of how investor sentiment can affect stock market returns (Gerlach, 2011). As soccer has the power to start wars, end wars and explain the world (Foer, 2004), it’s easy to see how that the outcome of international matches could affect stock market returns. "

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Firstly, we chose the FIFA World Cup for our research as the World Cup is among the top

viewed sporting events over the world and is conducted only once in every four years. The participating teams are representing their own countries and thus, we can use the country’s national stock index to estimate the effect of the match outcomes on the financial markets. "

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There are previous academic articles and research done on the topic of football and the

investor sentiments and all of them used hypothesis testing to see if check for

relationship

between match results and stock market returns. Some articles said a that there is exploitable predictable irrationality while some said there is no relationship at all. "

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Motivation and Theoretical Background!
In this section, we review past research and briefly explain why World Cup games may affect investor sentiment. We then briefly touch on investor sentiment and its documented effects on stock market return. "

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Wann et. al (2004) found that fans often experience a strong positive reaction when their team performs well and a corresponding negative reaction when their team performs poorly. Furthermore, this reaction tends to spillover to their outlook as well. The same reactions led to a corresponding increase or decreased self-esteem and a positive or negative outlook on life in

FIFA WORLD CUP MATCH OUTCOMES AND STOCK MARKET RETURNS"

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general. Schwarz et. al. (1987) were able to document this result through two World Cup matches played by Germany in 1982. The outcomes significantly changed the viewer’s assessments of their own well-being and their views on national issues. Hirt et al. (1992) found a similar effect on college students in the United States. The paper notes that college students perceive their own performance and capabilities to be better after watching a win by their own college basketball team than after watching a...
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