IDEAS home Printed from https://ideas.repec.org/a/eee/ememar/v26y2016icp20-33.html
   My bibliography  Save this article

What is the value of corporate sponsorship in sports?

Author

Listed:
  • Narayan, Paresh Kumar
  • Rath, Badri Narayan
  • Prabheesh, K.P.

Abstract

This paper investigates the stock market reaction to investor mood swings resulting from the Indian Premier League (IPL) cricket matches. We find that stocks listed on the Bombay Stock Exchange (BSE) that sponsor the IPL cricket are unaffected by the cricket matches. This finding is robust along two lines: (a) the effect is insignificant both statistically and economically which we demonstrate using a simple trading strategy; and (b) results hold across a wide range of portfolios. Our results, both statistical and trading strategy-based, suggest that the portfolios of companies that sponsor cricket in India are efficient. Our findings stand in sharp contrast to the evidence obtained by the broader sports literature suggesting that sports actually impact stock returns, driven principally by psychological factors.

Suggested Citation

  • Narayan, Paresh Kumar & Rath, Badri Narayan & Prabheesh, K.P., 2016. "What is the value of corporate sponsorship in sports?," Emerging Markets Review, Elsevier, vol. 26(C), pages 20-33.
    • Handle: RePEc:eee:ememar:v:26:y:2016:i:c:p:20-33
    DOI: 10.1016/j.ememar.2016.02.003
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1566014116300036
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ememar.2016.02.003?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Cao, Melanie & Wei, Jason, 2005. "Stock market returns: A note on temperature anomaly," Journal of Banking & Finance, Elsevier, vol. 29(6), pages 1559-1573, June.
    2. Lisa A. Kramer & Mark J. Kamstra & Maurice D. Levi, 2000. "Losing Sleep at the Market: The Daylight Saving Anomaly," American Economic Review, American Economic Association, vol. 90(4), pages 1005-1011, September.
    3. Paul M. Romer, 2000. "Thinking and Feeling," American Economic Review, American Economic Association, vol. 90(2), pages 439-443, May.
    4. David Hirshleifer & Tyler Shumway, 2003. "Good Day Sunshine: Stock Returns and the Weather," Journal of Finance, American Finance Association, vol. 58(3), pages 1009-1032, June.
    5. Biner, Burhan, 2013. "Is parity good? Externalities in professional sports," Economic Modelling, Elsevier, vol. 30(C), pages 715-720.
    6. Palomino, Frederic & Renneboog, Luc & Zhang, Chendi, 2009. "Information salience, investor sentiment, and stock returns: The case of British soccer betting," Journal of Corporate Finance, Elsevier, vol. 15(3), pages 368-387, June.
    7. Bannigidadmath, Deepa & Narayan, Paresh Kumar, 2016. "Stock return predictability and determinants of predictability and profits," Emerging Markets Review, Elsevier, vol. 26(C), pages 153-173.
    8. Narayan, Paresh Kumar & Narayan, Seema & K.P, Prabheesh, 2014. "Stock returns, mutual fund flows and spillover shocks," Pacific-Basin Finance Journal, Elsevier, vol. 29(C), pages 146-162.
    9. Narayan, Paresh Kumar & Ahmed, Huson Ali & Sharma, Susan Sunila & K.P., Prabheesh, 2014. "How profitable is the Indian stock market?," Pacific-Basin Finance Journal, Elsevier, vol. 30(C), pages 44-61.
    10. Robert J. Shiller, 2003. "From Efficient Markets Theory to Behavioral Finance," Journal of Economic Perspectives, American Economic Association, vol. 17(1), pages 83-104, Winter.
    11. Kaplanski, Guy & Levy, Haim, 2010. "Exploitable Predictable Irrationality: The FIFA World Cup Effect on the U.S. Stock Market," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 45(2), pages 535-553, April.
    12. Mishra, Vinod & Smyth, Russell, 2010. "An examination of the impact of India's performance in one-day cricket internationals on the Indian stock market," Pacific-Basin Finance Journal, Elsevier, vol. 18(3), pages 319-334, June.
    13. Anil Gupta & Anish Yousaf Naik & Neelika Arora, 2013. "Mapping Sponsorship-linked Marketing in Indian Premier League," IIM Kozhikode Society & Management Review, , vol. 2(1), pages 61-72, January.
    14. Fama, Eugene F, 1991. "Efficient Capital Markets: II," Journal of Finance, American Finance Association, vol. 46(5), pages 1575-1617, December.
    15. 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.
    16. Kasimati, Evangelia & Dawson, Peter, 2009. "Assessing the impact of the 2004 Olympic Games on the Greek economy: A small macroeconometric model," Economic Modelling, Elsevier, vol. 26(1), pages 139-146, January.
    17. Yuan, Kathy & Zheng, Lu & Zhu, Qiaoqiao, 2006. "Are investors moonstruck? Lunar phases and stock returns," Journal of Empirical Finance, Elsevier, vol. 13(1), pages 1-23, January.
    18. Narayan, Paresh Kumar & Bannigidadmath, Deepa, 2015. "Are Indian stock returns predictable?," Journal of Banking & Finance, Elsevier, vol. 58(C), pages 506-531.
    19. Deepa & Paresh K Narayan, "undated". "Are Indian Stock Returns Predictable?," Working Papers 2015_07, Deakin University, Department of Economics.
    20. AfDB AfDB, . "Annual Report 2012," Annual Report, African Development Bank, number 461.
    21. Chang, Shao-Chi & Chen, Sheng-Syan & Chou, Robin K. & Lin, Yueh-Hsiang, 2012. "Local sports sentiment and returns of locally headquartered stocks: A firm-level analysis," Journal of Empirical Finance, Elsevier, vol. 19(3), pages 309-318.
    22. Li, ShiNa & Blake, Adam & Thomas, Rhodri, 2013. "Modelling the economic impact of sports events: The case of the Beijing Olympics," Economic Modelling, Elsevier, vol. 30(C), pages 235-244.
    23. George Loewenstein, 2000. "Emotions in Economic Theory and Economic Behavior," American Economic Review, American Economic Association, vol. 90(2), pages 426-432, May.
    24. Biner, Burhan, 2014. "Parity in professional sports when revenues are maximized," Economic Modelling, Elsevier, vol. 40(C), pages 12-20.
    25. Stracca, Livio, 2004. "Behavioral finance and asset prices: Where do we stand?," Journal of Economic Psychology, Elsevier, vol. 25(3), pages 373-405, June.
    26. Barros, Carlos Pestana & Assaf, A.George & de Araujo, Ari Francisco, 2011. "Cost performance of Brazilian soccer clubs: A Bayesian varying efficiency distribution model," Economic Modelling, Elsevier, vol. 28(6), pages 2730-2735.
    27. Jegadeesh, Narasimhan & Titman, Sheridan, 1993. "Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency," Journal of Finance, American Finance Association, vol. 48(1), pages 65-91, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Narayan, Paresh Kumar & Phan, Dinh Hoang Bach & Bannigidadmath, Deepa, 2017. "Is the profitability of Indian stocks compensation for risks?," Emerging Markets Review, Elsevier, vol. 31(C), pages 47-64.
    2. Konstantinos Gkillas & Rangan Gupta & Chi Keung Marco Lau & Muhammad Tahir Suleman, 2020. "Jumps beyond the realms of cricket: India's performance in One Day Internationals and stock market movements," Journal of Applied Statistics, Taylor & Francis Journals, vol. 47(6), pages 1109-1127, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Fung, Ka Wai Terence & Demir, Ender & Lau, Chi Keung Marco & Chan, Kwok Ho, 2015. "Reexamining sports-sentiment hypothesis: Microeconomic evidences from Borsa Istanbul," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 34(C), pages 337-355.
    2. Fung, Ka Wai Terence & Demir, Ender & Lau, Marco Chi Keung & Chan, Kwok Ho, 2013. "An Examination of Sports Event Sentiment: Microeconomic Evidence from Borsa Istanbul," MPRA Paper 52874, University Library of Munich, Germany.
    3. Kim, Jae H., 2017. "Stock returns and investors' mood: Good day sunshine or spurious correlation?," International Review of Financial Analysis, Elsevier, vol. 52(C), pages 94-103.
    4. Brian C. Payne & Jiri Tresl & Geoffrey C. Friesen, 2018. "Sentiment and Stock Returns," Journal of Sports Economics, , vol. 19(6), pages 843-872, August.
    5. Konstantinos Drakos, 2010. "Terrorism activity, investor sentiment, and stock returns," Review of Financial Economics, John Wiley & Sons, vol. 19(3), pages 128-135, August.
    6. Chang, Shao-Chi & Chen, Sheng-Syan & Chou, Robin K. & Lin, Yueh-Hsiang, 2012. "Local sports sentiment and returns of locally headquartered stocks: A firm-level analysis," Journal of Empirical Finance, Elsevier, vol. 19(3), pages 309-318.
    7. Massimiliano Castellani & Pierpaolo Pattitoni & Roberto Patuelli, 2015. "Abnormal Returns of Soccer Teams," Journal of Sports Economics, , vol. 16(7), pages 735-759, October.
    8. Abudy, Menachem (Meni) & Mugerman, Yevgeny & Shust, Efrat, 2022. "The Winner Takes It All: Investor Sentiment and the Eurovision Song Contest," Journal of Banking & Finance, Elsevier, vol. 137(C).
    9. Narayan, Paresh Kumar & Phan, Dinh Hoang Bach & Bannigidadmath, Deepa, 2017. "Is the profitability of Indian stocks compensation for risks?," Emerging Markets Review, Elsevier, vol. 31(C), pages 47-64.
    10. Brian Lucey, 2010. "Lunar seasonality in precious metal returns?," Applied Economics Letters, Taylor & Francis Journals, vol. 17(9), pages 835-838.
    11. CURATOLA, Giuliano & DONADELLI, Michael & KIZYS, Renatas & RIEDEL, Max, 2016. "Investor Sentiment and Sectoral Stock Returns: Evidence from World Cup Games," Finance Research Letters, Elsevier, vol. 17(C), pages 267-274.
    12. Michael Nofer & Oliver Hinz, 2015. "Using Twitter to Predict the Stock Market," Business & Information Systems Engineering: The International Journal of WIRTSCHAFTSINFORMATIK, Springer;Gesellschaft für Informatik e.V. (GI), vol. 57(4), pages 229-242, August.
    13. Konstantinos Drakos, 2009. "Big Questions, Little Answers: Terrorism Activity, Investor Sentiment and Stock Returns," Economics of Security Working Paper Series 8, DIW Berlin, German Institute for Economic Research.
    14. Konstantinos Drakos, 2011. "Behavioral Channels in the Cross‐Market Diffusion of Major Terrorism Shocks," Risk Analysis, John Wiley & Sons, vol. 31(1), pages 143-159, January.
    15. Dimitrios Kourtidis & Željko Šević & Prodromos Chatzoglou, 2016. "Mood and stock returns: evidence from Greece," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 43(2), pages 242-258, May.
    16. Lepori, Gabriele M., 2015. "Investor mood and demand for stocks: Evidence from popular TV series finales," Journal of Economic Psychology, Elsevier, vol. 48(C), pages 33-47.
    17. Rizvi, Syed Aun R. & Arshad, Shaista, 2018. "Understanding time-varying systematic risks in Islamic and conventional sectoral indices," Economic Modelling, Elsevier, vol. 70(C), pages 561-570.
    18. Samahita, Margaret & Holm, Håkan J., 2020. "Mining for Mood Effect in the Field," Working Papers 2020:2, Lund University, Department of Economics.
    19. Emmanuel PETIT, 2010. "The role of regret in the persistence of anomalies in financial markets (In French)," Cahiers du GREThA (2007-2019) 2010-07, Groupe de Recherche en Economie Théorique et Appliquée (GREThA).
    20. Dimic, Nebojsa & Neudl, Manfred & Orlov, Vitaly & Äijö, Janne, 2018. "Investor sentiment, soccer games and stock returns," Research in International Business and Finance, Elsevier, vol. 43(C), pages 90-98.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ememar:v:26:y:2016:i:c:p:20-33. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/620356 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.