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Sports Sentiment and Stock Returns

Author

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  • ALEX EDMANS
  • DIEGO GARCÍA
  • ØYVIND NORLI

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.

Suggested Citation

  • Alex Edmans & Diego García & Øyvind Norli, 2007. "Sports Sentiment and Stock Returns," Journal of Finance, American Finance Association, vol. 62(4), pages 1967-1998, August.
    • Handle: RePEc:bla:jfinan:v:62:y:2007:i:4:p:1967-1998
    DOI: 10.1111/j.1540-6261.2007.01262.x
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    References listed on IDEAS

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