Olympic Games and the stockmarket

Does analysis of the historic behaviour of stock markets around the time of the four-yearly Olympic Games have anything of interest for investors?

The Olympic Games are a major event, often requiring much spending to improve infrastructure; and such spending can provide a fillip to a nation’s economy. If this affects prices on the stock market it is likely to happen soon after the initial announcement of a country winning the competition to host the event – so, long before the Olympics actually take place. The hosts for the Olympic Games are usually announced seven years in advance.

However, in this analysis we will look at the performance of host country stock markets in the year of the Olympics itself.

The following chart shows the performance of stock markets in countries that have recently hosted the Olympics: US (1984, 1996), Australia (2000), Greece (2004), UK (2012). (NB. China was omitted as it hosted the Games in 2008 – a year when stock markets had their focus on other matters; the share price of National Bank of Greece was used as a proxy for the Greek stock market.). The index data has been re-based to start at 100. The Games generally take place in August-September (indicated by the shaded portion in the chart).

Stock market performance of Olympics hosts

There are no easily discernible general trends from the above chart.

To analyse this in some more detail, the following chart plots the average performance for all the markets over three periods:

1         Before games: from 1 January to the start of the games

2         During games: the two-three week period of the games

3         After games: from the end of the games to 31 December

The darker bars show the average performance calculated excluding China and Greece.

Average performance in year of OlympicsGenerally, equities in host country markets appear to be weak in the months leading up to the games, perhaps when the media runs stories of cost overruns and missed timetables. And then there appears to be a relief rally afterwards.


A recent academic paper analysed the performance of stocks for two hosting countries: China in 2008 and the UK in 2012. The paper summarised its findings as-

Olympic “euphoria” is sufficient in both China and the UK to influence stock returns and valuations but the overall fundamental benefits of the Olympics are small.

This article is an extract from The UK Stock Market Almanac 2016.

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Football (soccer) and the Stock Market

This article presents a brief review and listing of academic papers on football (soccer) and the stock market.

The main focus of research on this topic is on whether the results of football games have an effect on share prices – the majority of papers find that they do. For academics, the interest here is that football results provide an easy and quantifiable proxy for mood, and much of this research therefore comes under the ambit of behavioural finance. Further, the existence of betting markets on football results allow researches to add, and indeed quantify, the relationship between expectations and results and to study the effect of their variance.

Academic research on football and the market focuses on three areas (which is how this review is structured)-

  1. Clubs
  2. National teams
  3. FIFA World Cup

1. Clubs

Zuber et al (2005) found that the price behaviour of publicly-quoted English Premier League teams was insensitive to game results; they concluded that a new type of investor gained value from mere share ownership. By contrast, Stadtmann (2006) studied the share price of Borussia Dortmund and found that game results were an important driver of the share price. The research of Berument et al (2006) was partly consistent with both the preceding in finding that the Turkish team Besiktas’s win against foreign rivals in the Winner’s Cup did increase stock market returns, but that no such effect was found for two other Turkish teams: Fenerbahçe and Galatasaray.

Palomino et al (2009) found that stock prices did react strongly to game results generating significant abnormal returns and trading volumes; and, further, that winning team share prices experienced a high level of overreaction. Their research also studied the football betting market and found that while betting odds were a good predictor of game outcomes, investors largely ignored these odds, and that betting information predicted stock price overreactions to game results.

The research of Benkraiem et al (2009) was largely consistent with those that found game results had an influence on returns and trading volumes; their analysis further showed that the extent of the share price effect and timing of it was dependent on the type of result (win, draw, lose) and match venue (home, away). Berument et al (2009) argued that the share price effect on football teams quoted on the Istanbul Exchange increased with the fanaticism of the team’s supporters.

Scholtens and Peenstra (2009) research was again consistent with the finding that match results affected share prices (significant and positive for victories and negative for defeats); and they further found that the effect was significantly stronger for defeats, and stronger in European than for national competitions.

Like Palomino et al (2009), Bernile and Lyandres (2011) analysed the football betting markets to find that investors are overly optimistic about their teams’ prospects before games and disappointed afterwards, which leads to abnormal negative returns after games.

Bell et al (2012), found that share returns were more influenced by important games for English clubs, where “important” was defined as a game having a particular significance for the club’s league position. Godinho and Cerqueira (2014) also incorporated the concept of game importance; they built a model for 13 clubs of six different European countries that weights games according to a new measure of match importance and using the betting markets to isolate the unexpected component of match results; this model finds a significant link between the results and share performance.

Berkowitz and Depken (2014) found that share prices reacted asymmetrically to game results: the negative effect being greater and quicker for losers than the positive effect for winners. They suggested the reason for this is that losing is a stronger predictor of future losing (and lower financial performance) than winning is a predictor of future winning.

2. National teams

Ashton, Gerrard and Hudson (2003) found a strong association between the England football team results and subsequent daily changes in the FTSE 100 index. However the methodology employed by Ashton et al (2003) was later criticised by Klein, Zwergel and Fock (2009) who rejected the presence of any link. In response, Ashton, Gerrard and Hudson (2011) carried out new analysis, using a larger dataset, and re-asserted that a link does exist for the original study period of 1984-2002, although they report that the strength of the link has declined over the subsequent period 2002-2009.

Edmans et al (2007) also found a link between national soccer results of the market; for example, significant markets falls after soccer losses, and effect stronger for smaller stocks and in more important games.

3. FIFA World Cup

Regarding the FIFA World Cup academic research tends to focus on two areas: the effect of the announcement of the World Cup host and market behaviour during and immediately after the World Cup.

Obi, Surujlal and Okubena (2009) found negative abnormal returns for South African shares in the lead up to the announcement that South Africa would host the 2010 World Cup, followed by positive abnormal returns in the aftermath of the announcement. Abuzayed (2013) found evidence of a positive abnormal market return in Qatar linked to the announcement of that country being host for the 2022 FIFA World Cup; and further that the effect was strongest in the service sector.

Vieira (2012) analysed the 2010 FIFA World Cup and found no link between games results and subsequent market behaviour.

Kaplanski and Levy (2010), found that the average return on the US equity market over the period of the World Cup was -2.6% (compared to an average return of +1.2% for similar periods at other times); this effect did not depend on the games’ results and as the aggregate effect depended on many games it was therefore robust. This result was supported by Ralph (2010) who also found an average return of -2% for the same conditions. Kaplanski and Levy (2013) updated their previous research and found that although an abnormal profit still existed for the 2010 World Cup, the price pattern was different from previous World Cups (possibly due the publication of news of this effect just before the 2010 World Cup). They therefore suggest that this effect will vanish in the future.

INDEX (of papers listed below)

[Papers listed in reverse date order; indicates major paper.]

  1. Asymmetric Reactions to Good and Bad News as Market Efficiency: Evidence from Publicly-Traded Soccer Clubs [2014]
  2. The Impact of Expectations, Match Importance and Results in the Stock Prices of European Football Teams [2014]
  3. Sentiment, Irrationality and Market Efficiency: The Case of the 2010 FIFA World Cup [2013]
  4. Sport and emerging capital markets: market reaction to the 2022 World Cup announcement [2013]
  5. Abnormal Returns of Soccer Teams: Reassessing the Informational Value of Betting Odds [2013]
  6. Moneyball in the Turkish Football League: A Stock Behavior Analysis of Galatasaray and Fenerbahce Based on Information Salience [2013]
  7. The Effect of Soccer Performance on Stock Return: Empirical Evidence From “The Big Three Clubs” of Turkish Soccer League [2013]
  8. Market Reaction to Sports Sentiment: Evidence from the European Football Championship 2008 [2013]
  9. Over the moon or sick as a parrot? The effects of football results on a club’s share price [2012]
  10. Investor sentiment and market reaction: evidence on 2010 FIFA World Cup [2012]
  11. The Effect of Performance of Soccer Clubs on Their Stock Prices: Evidence from Turkey [2011]
  12. Understanding Investor Sentiment: The Case of Soccer [2011]
  13. Do national soccer results really impact on the stock market? [2011]
  14. Is There a Correlation Between World Cups and S&P 500 Performance? [2010]
  15. Exploitable Predictable Irrationality: The FIFA World Cup Effect on the U.S. Stock Market [2010]
  16. Sporting Performances and the Volatility of Listed English Football Clubs [2010]
  17. Reconsidering the impact of national soccer results on the FTSE 100 [2009]
  18. Scoring on the stock exchange? The effect of football matches on stock market returns: an event study [2009]
  19. Soccer, stock returns and fanaticism: Evidence from Turkey [2009]
  20. Market reaction to sporting results: The case of European listed football clubs [2009]
  21. Information salience, investor sentiment, and stock returns: The case of British soccer betting [2009]
  22. South African Equity Market Reaction to the 2010 World Cup Announcement [2009]
  23. Sports Sentiment and Stock Returns [2007]
  24. Performance of soccer on the stock market: Evidence from Turkey [2006]
  25. Frequent news and pure signals: the case of a publicly traded football club [2006]
  26. Investor–fans? An examination of the performance of publicly traded English Premier League teams [2005]
  27. Economic impact of national sporting success: evidence from the London stock exchange [2003]
  28. Estimating the value of the Premier League or the worlds most profitable investment project [2002]

Asymmetric Reactions to Good and Bad News as Market Efficiency: Evidence from Publicly-Traded Soccer Clubs
Authors [Year]: Jason P. Berkowitz and Craig A. Depken, II [2014]
Journal [Citations]:
Abstract: Event studies suffer from a number of potential shortcomings, most notable the possibility of the market reacting to an event before it actually occurs. To avoid this problem, this paper investigates how the stock prices of publicly traded English football (soccer) teams respond to the outcomes of soccer matches which provide two clear and simultaneous signals, good news for the winner and bad news for the loser. We first establish a link between on-field performance and a club’s financial performance and then show that the market responds asymmetrically to good news and bad news, punishing losers faster than winners. This last result arises because losing is a stronger predictor of future losing, and lower financial performance, than winning is a predictor of future winning.
Ref: AA912

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10 strange financial papers

While, of course, there are many very serious – and fascinating – academic papers on finance, such as Multifractality and long-range dependence of asset returns: the scaling behavior of the Markov-switching multifractal model with lognormal volatility components, there are other papers that are…well, a little strange. This article lists ten such papers.

A long list of questions could be compiled to which the simple answer is no. A good source for such questions is headings from the UK newspaper, the Daily Mail (e.g. Are we all going to die next Wednesday?). Another good source is academic papers. In one paper below the implicit question is: are stock returns affected by ghostly legends? Short (and long) answer: no. Another paper finds a correlation between a country’s linguistic diversity and stock market trading volumes. Perhaps this simply results from the number of trades that have to by reversed following language confusion: “I thought you said buy?”, “No, I say sardine!”

A strong contender for the Paper in Poor Taste Award would be the one below looking at the influence of sudden celebrity deaths on the stock market (the inclusion of the word “sudden” in the title will no doubt be appreciated by the judges of this award). John Kay recently wrote an excellent article about the wisdom of crowds (The parable of the ox); appearing here is a paper that tackles the same topic but in a rather left-field context. The paper finds that the price movements of tourism stocks on the Tel Aviv Stock Exchange more accurately forecast the success of ceasefire agreements in the Levant than did editorials in the Jerusalem Post and New York Times.

How is your well-being? The authors of a paper here believe it (that is, your well-being) is affected by the stock market and that the government should do something about it. And if the government doesn’t do something about it, this other paper reckons we’re all going to the loony bin.

Finally, nomination for one of the creepiest papers must go to the one here that found that when CEOs are away from their headquarters companies announce less news than usual. Fair enough, but to analyse this the author identified CEO absences by “merging corporate jet flight histories with records of CEOs’ property ownership near leisure destinations”. We’ve had shareholder activists, are we now to see the rise of shareholder stalkers – would-be analysts hiding in the bushes with binoculars checking on the holiday timetables of CEOs?

INDEX (of papers listed below)

  1. Anomalies in Finance: Superstition in the Italian Stock Market [2010]
  2. Ghostly Traditions and Market Performances [2013]
  3. Chinese superstition in US commodity trading [2014]
  4. Linguistic Diversity and Stock Trading Volume [2013]
  5. Tailspotting: Identifying and profiting from CEO vacation trips [2012]
  6. Local sports sentiment and returns of locally headquartered stocks: A firm-level analysis [2012]
  7. The Effects of Sudden Celebrity Deaths on the US Stock Market [2011]
  8. The Oracle or the Crowd? Experts versus the Stock Market in Forecasting Ceasefire Success in the Levant [2011]
  9. Does the Market Make us Happy? The Stock Market and Well-being [2013]
  10. Do stock prices drive people crazy? [2014]

Anomalies in Finance: Superstition in the Italian Stock Market
Authors [Year]: McGuckian, Fergus J [2010]
Journal [Citations]:
Abstract: The efficiency of global financial markets has long been a topic of contention for both academics and industry professionals alike. Evidence suggests that most of the time, asset markets do a good job of correctly processing and assimilating information into prices. However, a substantial literature has built up proof which indicates that this is quite often not the case. A wide variety of anomalies and so called ‘effects’ have been documented revealing stock price behaviour that is inconsistent with the predictions of traditional models. These inconsistencies illustrate departures from theory and are unexplainable within the mainstream economics paradigm; conversely, many anomalies can be accounted for using explicit insights from behavioural finance. This study discusses the theoretical debate and investigates whether financial markets are affected by superstition and if so, if this is reflected in asset prices. A new discovery is added to the literature, namely the Friday 17th anomaly; with regard to the Italian MIB Storico index results indicate that in comparison to regular Fridays – which are aggregately positive – returns for Friday the 17th are four times larger and statistically different.
Ref: AA469

Ghostly Traditions and Market Performances
Authors [Year]: Yang, Der-Yuan and Andy Chien [2013]
Journal [Citations]:
Abstract: Old traditions never die; they just fade away. However, some are still deeply embedded in our life and practiced every day. This paper examines some notable Taiwanese ghostly legends, testing their potency on the stock markets. The results show that though some ancient beliefs still carry heavy weight in our daily life ostensibly, their impact on the stock market has been negligible. To be sure, some of the customs of our ancestors may have lingered around long er than expected, but contrary to our expectations, their spirits have languished, showing no vigor as financial guidance.
Ref: AA485
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Super Bowl Indicator

This coming Sunday is Super Bowl XLVIII.

One of the most famous market predictors in the U.S. is the Super Bowl Indicator. This holds that if the Super Bowl is won by a team from the old National Football League the stock market will end the year higher than it began, and if a team from the old American Football League wins then the market will end lower.


Well, it certainly sounds far-fetched that a game of mutant rugby could affect the economy and stock market. However, in 1990 two academics published a paper (Krueger and Kennedy, 1990) finding that the indicator was accurate 91% of the time.

And then in 2010 George Kester, a finance professor at Washington and Lee University, published a paper (Kester, 2010) with new research that found that the Super Bowl Indicator still worked (although its accuracy had fallen to 79%). Kester also calculated that a portfolio that switched between stocks and treasury bills governed by the Super Bowl Indicator would be worth twice that of a simple portfolio invested continuously in the S&P 500.

And the connection between American football and the UK stock market is…?

Seeing how closely correlated the U.S. and U.K. stock markets are, it might be interesting to see how the Super Bowl Indicator applies to the U.K. market.

The following chart shows the annual returns of the FTSE All Share index since 1967 (when the Super Bowl started). The Y-axis has been capped at +/- 50%, which truncates the bars for the years 1974 (-55%) and 1975 (+136%). The years for which the Super Bowl Indicator failed to accurately predict the direction of the market has been indicated with white bars in the chart.

FTSE All-Share annual returns as predicted by the super bowl [1967-2013]As one can see, the indicator got off to a great start in the years following 1967, but recently its record has been patchy. Overall, the indicator was accurate in 72% of years (only slightly less than its accuracy rate in the US).

Unfortunately a paper (Born and Acherqui, 2013) published last year has rather spoilt the fun. The authors found that the ability of the Super Bowl Indicator to forecast the market had reduced to almost zero in the years since publication of the Krueger and Kennedy paper in 1990.

Market around the time of the Super Bowl

The chart below shows the market behavior around the time of the Super Bowl; the bars represent the average daily returns in the FTSE All Share Index since 1967 for the three days before, and three days following, the Super Bowl (which always takes place on a Sunday).

FTSE All-Share average daily returns for the six days around the Super Bowl [1967-2013]The average daily returns in the index for all days since 1967 was 0.03%; we can see therefore that the market is abnormally weak two days before a Super Bowl and abnormally strong one day before it.



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