Abstract

http://ssrn.com/abstract=1343685
 
 

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Understanding Investor Sentiment: The Case of Soccer


Gennaro Bernile


Singapore Management University - Lee Kong Chian School of Business

Evgeny Lyandres


Boston University

2011

Financial Management, Vol. 40, pp. 357-380, 2011

Abstract:     
We examine whether investors' biased ex-ante beliefs regarding the probability distribution of future events' outcomes can partially explain the stock market's inefficient response to resolution of uncertainty. In our experiment, we analyze stock returns of publicly traded European soccer clubs around important matches. Using a novel proxy for investors' expectations derived from contracts traded on betting exchanges (prediction markets), we find that in our sample investor sentiment is attributable in part to a systematic bias in investors' ex-ante expectations. Investors are overly optimistic about their teams' prospects ex-ante and, on average, end up disappointed ex-post, leading to negative post-event abnormal returns. Our evidence may have important implications for firms' investment decisions and corporate control transactions.

Number of Pages in PDF File: 50

Keywords: investor sentiment, expectations, prediction markets

JEL Classification: C93

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Date posted: February 17, 2009 ; Last revised: November 12, 2013

Suggested Citation

Bernile, Gennaro and Lyandres, Evgeny, Understanding Investor Sentiment: The Case of Soccer (2011). Financial Management, Vol. 40, pp. 357-380, 2011. Available at SSRN: http://ssrn.com/abstract=1343685 or http://dx.doi.org/10.2139/ssrn.1343685

Contact Information

Gennaro Bernile
Singapore Management University - Lee Kong Chian School of Business ( email )
50 Stamford Road
Level 4
Singapore, 178899
Singapore
+65-68085478 (Phone)

Evgeny Lyandres (Contact Author)
Boston University ( email )
595 Commonwealth Avenue
Boston, MA 02215
United States
617-3582279 (Phone)
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