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Sports Sentiment and Stock Returns

Alex Edmans
University of Pennsylvania - The Wharton School

Diego Garcia
University of North Carolina at Chapel Hill

Oyvind Norli
Norwegian School of Management (BI) - Department of Financial Economics

May 2006

Sixteenth Annual Utah Winter Finance Conference
EFA 2005 Moscow Meetings

Abstract:
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.

Keywords: Football, sports, soccer, sentiment, mood, stock returns, behavioral finance

JEL Classifications: A12, G14

Working Paper Series

Date posted: March 02, 2005 ; Last revised: November 07, 2006

Suggested Citation

Edmans, Alex, Garcia, Diego and Norli, Oyvind, Sports Sentiment and Stock Returns (May 2006). Sixteenth Annual Utah Winter Finance Conference; EFA 2005 Moscow Meetings. Available at SSRN: http://ssrn.com/abstract=677103

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Contact Information

Oyvind Norli (Contact Author) Norwegian School of Management (BI) - Department of Financial Economics ( email ) Oslo N-0442 Norway +4746410514 (Phone)
Alex Edmans University of Pennsylvania - The Wharton School ( email ) 3641 Locust Walk Philadelphia, PA 19104-6365 United States
Diego Garcia University of North Carolina at Chapel Hill ( email ) Chapel Hill, NC 27599-3490 1-919-962-8404 (Phone) HOME PAGE: http://www.unc.edu/~garciadi/