The Italian stock market rose on Monday while the U.K. stock market fell. Italy’s FTSE MIB index I945, -0.50% rose 0.92% on the day, while the FTSE U.K. All-Share Index ASX, +0.02% was flat.
Perhaps the best known study on this topic appeared in the August 2007 issue of the Journal of Finance. The study, “Sports Sentiment and Stock Returns,” was conducted by finance professors Alex Edmans of the London Business School; Diego Garcia of the University of Colorado Boulder, and Oyvind Norli of the Norwegian School of Management.
One implication of this asymmetry is that the world equity market will have below-average returns during global sports competitions — during times in which some countries will be eliminated, in other words. Supporting evidence is found in another study, “Exploitable Predictable Irrationality: The FIFA World Cup Effect on the U.S. Stock Market,” by Guy Kaplanski of Bar-Ilan University and Haim Levy of the Hebrew University of Jerusalem.
The investment implication I draw from this body of research: Don’t look for the global stock market to perform better or worse than normal during the upcoming Olympics. That doesn’t mean the market won’t. It just means that if it does, you shouldn’t attribute this result to the Olympics. In other words, listening to upbeat songs can help boost stocks while sadder songs bring the market down.
Excellent read