Article ID: | iaor2009772 |
Country: | United Kingdom |
Volume: | 62 |
Issue: | 4 |
Start Page Number: | 1967 |
End Page Number: | 1998 |
Publication Date: | Aug 2007 |
Journal: | Journal of Finance |
Authors: | Edmans Alex, Garca Diego, Norli Oyvind |
Keywords: | sports |
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.