FOR SPORTS FANS: turn your passion into a winning Investment Strategy?

It comes as no surprise that major sporting events and results around the world (football, or soccer for the americans) not only capture huge attention and, with it, generate a massive amount of passion, but also tend to engender considerable economic impacts on hosting/home countries.

We can then ask ourselves whether these also affect the respective stock markets, thereby giving rise to exploitable strategies?

>> Soccer evidence from Around the World

it has been widely reported that there seems to be a correlation between results of individual football matches and respective short-term local stock market trends.

  • The Italian Case

Boido, Fasano (2006)Football and Mood in Italian Stock Exchange

Soccer is known to bring “laughter and tears, bliss and pain”, and with this in mind, the authors draw from the asset pricing anomaly literature to investigate whether football results have a sufficiently significant impact on mood, to be responsible for prices reaction. Well, they ultimately find that winnings have positive impacts on price-earning ratios relative to losses (note that it appears Italian investors also react negatively to ties).

  • The English Case

Ashton, Hudson, Gerrard (2004)Economic impact of national sporting success: evidence from the London stock exchange 

In this paper, the authors find evidence of a correlation between the performance of the English national soccer team and the main country stock market index, the FTSE100. The latter tends to react positively to wins of the former, and vice versa for losses.

  • The Turkish Case

Berument, Ceylan, Ogut-Eker (2009)Soccer, stock returns and fanaticism: Evidence from Turkey

The researchers find yet again proof that Istanbul stock market returns are affected to some extent by the performance of the three major Turkish soccer teams. Even more curiously, they find this to be in proportion to the fanaticism of their fans.

Berument, Ogut-Eker, Dogan (2007)Football and exchange rates: empirical support for behavioral economics.

Interestingly enough, Turkey seems to be sensible to soccer performance of the aforementioned national teams, and in particular, their successes against foreign rivals, seems to have a positive effect on the exchange rate of the Turkish lira (against the US dollar).

  • An Internationally Broader Approach

Edman, Garcia and Norli (2007)Sports Sentiment and Stock Returns

These economists take an unprecedented international approach (targeting 39 countries) and also broaden the horizons by expanding their scope beyond soccer, and include cricket, rugby and basketball games (although the magnitude of the impacts of these other sports appears smaller than soccer). Focusing on investors behaviour, coupled with stock market reactions, the authors find evidence of a “Loss Effect” in stocks triggered by mood changes after sporting events. In fact, they ultimately find that countries losing or being eliminated from international tournaments experience, the next day, abnormal stock market losses of around 0,5%. (It is interesting to note however that wins do not seem to cause similar positive returns).


Kaplanski, Levy (2008)Exploitable Predictable Irrationality: The FIFA World Cup Effect on the U.S. Stock Market

The authors, as the title of their research suggests, find a way to potentially exploit a predictably irrational feature in the market (predictable in the sense that, on aggregate, the effect does not depend on the games results). They show that, on average, US market returns over the World Cups is -2.58%, compared to +1.21% for all-days average returns during the same period.

Goldman Sachs Report The World Cup and Economics 2014

Looking at the history, this report highlights the fact that the winning team undergoes a period of outperformance over the weeks after the World Cup final and it seems to do so quite substantially (3.5% above global markets in the first month). However, optimistic sentiment seems to fade away rather quickly, with outperformance disappearing after 3 months, finally resulting in an underperformance, on average, of around 4% over the following the final. As they put it: “The message seems to be: enjoy the gains while they last…

Screen Shot 2015-04-16 at 09.45.22


One could expect Olympic Games to be the anticipation of major economic boosts to the host cities and countries. Do these expectations also translate in stock markets?

  • Athens 2004

Veraros, Kasimati, DawsonThe 2004 Olympic Games announcement and its effect on the Athens and Milan stock exchanges

This study shows an economically and statistically positive effect, from the Games, not only on the ASE (Athens Stock Exchange) but also on infrastructure-related industries.

 Floros (2010)The impact of the Athens Olympic Games on the Athens Stock Exchange

This paper also finds similar results, and in addition, introduces a twist and shows a boosting effect on the ASE index from the number of Greek Medallists.

  • London 2012

Asteriou, Samitas, Kenourgios (2013)The London 2012 Olympic Games Announcement Effect on London Stock Exchange 

This paper investigates the reaction of the LSE (London Stock Exchange) to the announcement of the city hosting 2012 Summer Olympic Games. As previous studies on the topic, they find an overall positive impact.

  • IN GENERAL: an “Announcing effect”

Dick, Wang (2010)The Economic Impact of Olympic Games: Evidence from Stock Markets

For a more comprehensive approach, the authors, through an event study, analyse stock market reactions to the announcement of the Olympics host cities. They highlight a positive announcement effect of hosting the games (with a cumulative abnormal return of 2% within days).

[nb: Conversely, no negative impact is recorded for the losing bidders.]

>> A Trading Strategy?

It is interesting to note that, despite the evidence, almost none of the papers about sports explicitly considers trading strategies based on these anomalies. In fact, it is true that, given the magnitude of these effects, as well as their frequency (many only every four years), significantly outperforming the market seems like a hard task. Moreover, any strategy would also probably involve actually betting on the outcome of the sporting matches.

-> A simple (Behavioural) Hedging Strategy?

Alternatively, given the studies specifically focusing on soccer, a fan, in order to avoid sporting-related market losses, could bet against their national teams thereby at least offsetting personal disappointment. Nonetheless, it is true that a passionate fan would probably not behave in this way.

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Stay tuned dear Storm-Troopers !

(Yes, this is indeed the term we coined for our loyal readers… Oh and yes, we are Star Wars fans).


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