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Sports events influence how we feel.
They can affect our health and our wealth.
FIFA World Cup
Health
During the 1998 World Cup, after Argentina beat England, hospital admissions for heart attcks were up 25 percent. Similarly, when their national team is playing, Brazilians have more heart attacks
Wealth
Bloomberg tells us that shorting a small cap stock from a country likely to lose at the World Cup has been profitable in the past. They say to just wait for the December 3 elimination stage. Since England, Germany, Spain, France, Belgium, Portugal, and the Netherlands are all playing, there are lots of possibile losers. Important matches seem to hve the biggest impact.
Researchers have documented statistically significant return decreases:
Using data on trading activity during the 2010 games from 15 International stock markets, European Central Bank scholars concluded that trading volume and prices were impacted.
Specifically…
- There was a 45% drop in tthe number of trades.
- Trading volume was down by 55 percent.
- A goal brought trading activity down further.
Our Bottom Line: Behavioral Economics
Attention Allocation
As economists we know that land, labor, and capital are scarce. Defined as limited quantities, scarcity is the reason we need to allocate goods and services. Societies always have to decide who gets what and how much.
Pivoting slightly, Nobel Laureate Daniel Kahneman told us that attention is also a scarce resource. Taking the leap to World Cup competition, we can see how fans allocate more of their attention to the games and less to investing.
Loss Effet
Behavioral Economists have also connected how we repsond to loss and stock market activity. They hypothesize that by affecting investor mood, World Cup losses spillover to stock market prices.
My sources and more: Using an econlife post from 2014, I updated the research with recent articles from MarketWatch (the source of our featured image) and Bloomberg. From there, for the academic perspective, you might want to look at these two papers, here and here.
