Sports Sentiment and Stock Returns

  • Author(s): ALEX EDMANS, DIEGO GARCÍA, ØYVIND NORLI
  • Published: Aug 14, 2007
  • Pages: 1967-1998
  • DOI: 10.1111/j.1540-6261.2007.01262.x

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.

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