World Cup Losses Undermine Stock Markets

Defeats in World Cup soccer games, depressing enough for the teams concerned, also weigh heavily on the stock markets in their home countries. According to a study to be published in the Journal of Finance on June 29, a World Cup loss during a competition's group phase shaves an average 0.38 percent off a team's home stock market index. But during the knock-out phase of tournaments, markets fall by 0.49 percent, wiping billions off the value of investors' portfolios.

"To put the results in perspective, 40 basis points (0.40 percent) of the UK market capitalization as of November 2005 is $11.5 billion," the authors of the study said. "This is approximately three times the total market value of all the soccer clubs belonging to the English Premier League."

The study was conducted by the Norwegian Oeyvind Norli of Oslo's business school, as well as US professors Alex Edmans of MIT and Diego Garcia of Dartmouth College. They compared stock market indices of 39 soccer-playing nations in the wake of World Cup and other major international matches between January 1973 and December 2004.

"We already know that the markets' supposed rationality is in fact influenced by the feelings of individuals and we worked on the basis that the feelings which universally affect the humor of investors are related to sport, especially to football," Norli told news agency AFP.

While losses invariably affect stock market levels, victories don't necessarily cause a bull run, the study found.