Exploitable Predictable Irrationality: The FIFA World Cup Effect on the U.S. Stock Market

29 Pages Posted: 27 Mar 2008 Last revised: 28 Dec 2010

See all articles by Guy Kaplanski

Guy Kaplanski

Bar-Ilan University - Graduate School of Business Administration

Haim Levy

Hebrew University of Jerusalem - Jerusalem School of Business Administration; Fordham University

Date Written: May 1, 2008

Abstract

In a recently published paper, Edmans, Garc¿a, and Norli (2007) reveal a strong association between results of soccer games and local stock returns. Inspired by their work, we propose a novel approach to exploit this effect on the aggregate international level with the following three unique features: (i) The aggregate effect does not depend on the games results; hence, the effect is an exploitable predictable effect. (ii) The aggregate effect is based on many games; hence, it is very large and highly significant. We find that the average return on the U.S. market over the World Cup's effect period is -2.58%, compared to 1.21% for all-days average returns over the same period length. (iii) Exploiting the aggregate effect is involved with trading in a single index for a relatively long period.

Keywords: exploitable predictable effect, mood event effect, market sentiment, behavioral finance, abnormal returns

JEL Classification: A12, A14, F21, G14

Suggested Citation

Kaplanski, Guy and Levy, Haim, Exploitable Predictable Irrationality: The FIFA World Cup Effect on the U.S. Stock Market (May 1, 2008). Journal of Financial and Quantitative Analysis (JFQA), Vol. 45, No. 2, pp. 535-553, April 2010, Available at SSRN: https://ssrn.com/abstract=1081286

Guy Kaplanski (Contact Author)

Bar-Ilan University - Graduate School of Business Administration ( email )

Ramat Gan
Israel

Haim Levy

Hebrew University of Jerusalem - Jerusalem School of Business Administration ( email )

Mount Scopus
Jerusalem, 91905
Israel

HOME PAGE: http://pluto.huji.ac.il/~mshlevy/

Fordham University ( email )

140 West 62nd Street
New York, NY 10023
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
1,631
Abstract Views
12,206
Rank
20,501
PlumX Metrics