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Sports Sentiment and Stock Returns

47 Pages Posted: 2 Mar 2005 Last revised: 20 Dec 2013

Alex Edmans

London Business School - Institute of Finance and Accounting; European Corporate Governance Institute (ECGI); Centre for Economic Policy Research (CEPR)

Diego Garcia

University of Colorado at Boulder - Leeds School of Business

Oyvind Norli

BI Norwegian Business School - Department of Financial Economics

Date Written: May 1, 2006

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 Classification: A12, G14

Suggested Citation

Edmans, Alex and Garcia, Diego and Norli, Oyvind, Sports Sentiment and Stock Returns (May 1, 2006). Journal of Finance 62(4), 1967-1998, August 2007. Available at SSRN: https://ssrn.com/abstract=677103 or http://dx.doi.org/10.2139/ssrn.677103

Alex Edmans

London Business School - Institute of Finance and Accounting ( email )

Sussex Place
Regent's Park
London NW1 4SA
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Centre for Economic Policy Research (CEPR) ( email )

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Diego Garcia

University of Colorado at Boulder - Leeds School of Business ( email )

Boulder, CO 80309-0419
United States

Oyvind Norli (Contact Author)

BI Norwegian Business School - Department of Financial Economics ( email )

Nydalsveien 37
Oslo, N-0442
Norway
+4746410514 (Phone)

HOME PAGE: http://www.bi.edu/research/employees/?ansattid=a0510249

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