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Sentiment, irrationality and market efficiency: The case of the 2010 FIFA World Cup

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  • Kaplanski, Guy
  • Levy, Haim

Abstract

Soccer games create sentiment, which affects stock prices. The World Cups before 2010 provided exploitable abnormal profit which was not exploited, presumably because it was unknown. Just before the 2010 World Cup, the exploitable effect has been discovered and widely cited by practitioners who even suggested recipe how to exploit it. Indeed, the information on the abnormal profit created in 2010 World Cup a price pattern which is different from those corresponding to the previous World Cups. Like other market anomalies, we expect that market efficiency will be restored and this new effect will vanish in the future.

Suggested Citation

  • Kaplanski, Guy & Levy, Haim, 2014. "Sentiment, irrationality and market efficiency: The case of the 2010 FIFA World Cup," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 49(C), pages 35-43.
  • Handle: RePEc:eee:soceco:v:49:y:2014:i:c:p:35-43
    DOI: 10.1016/j.socec.2014.02.007
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    References listed on IDEAS

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    1. Kavetsos, Georgios & Szymanski, Stefan, 2010. "National well-being and international sports events," Journal of Economic Psychology, Elsevier, vol. 31(2), pages 158-171, April.
    2. repec:hrv:faseco:33077905 is not listed on IDEAS
    3. Kaplanski, Guy & Levy, Haim, 2010. "Sentiment and stock prices: The case of aviation disasters," Journal of Financial Economics, Elsevier, vol. 95(2), pages 174-201, February.
    4. Schwert, G. William, 2003. "Anomalies and market efficiency," Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, edition 1, volume 1, chapter 15, pages 939-974, Elsevier.
    5. Berument, Hakan & Yucel, Eray M., 2005. "Long live Fenerbahce: The production boosting effects of football," Journal of Economic Psychology, Elsevier, vol. 26(6), pages 842-861, December.
    6. 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.
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    Cited by:

    1. Mehwish Aziz Khan & Eatzaz Ahmad, 2018. "Measurement of Investor Sentiment and Its Bi-Directional Contemporaneous and Lead–Lag Relationship with Returns: Evidence from Pakistan," Sustainability, MDPI, Open Access Journal, vol. 11(1), pages 1-20, December.
    2. 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.
    3. Donadelli, Michael & Gufler, Ivan & Pellizzari, Paolo, 2020. "The macro and asset pricing implications of rising Italian uncertainty: Evidence from a novel news-based macroeconomic policy uncertainty index," Economics Letters, Elsevier, vol. 197(C).

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    More about this item

    Keywords

    Market efficiency; Investor sentiment; Flow of information; Behavioral finance; Abnormal returns;
    All these keywords.

    JEL classification:

    • A12 - General Economics and Teaching - - General Economics - - - Relation of Economics to Other Disciplines
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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