Sports Sentiment and Stock Returns





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    • Edmans is from the Wharton School, University of Pennsylvania, García is from the Kenan-Flagler Business School, University of North Carolina at Chapel Hill and Norli is from the Norwegian School of Management. Part of this research was conducted while Norli and García were at the Tuck School of Business at Dartmouth. This paper is included as chapter 2 of Edmans's thesis at the MIT Sloan School of Management. It was earlier circulated as two separate papers: “Football and Stock Returns” by Diego García and Øyvind Norli and “Soccer, Sentiment, and Stocks” by Alex Edmans. Our joint paper was first circulated under the title “Football and Stock Returns.” We thank an anonymous referee, an associate editor, Jack Bao, Nick Barberis, Andrew B. Bernard, Øyvind Bøhren, B. Espen Eckbo, Florian Ederer, Robert Engle, Ken French, Xavier Gabaix, David Hirshleifer, Tim Johnson, Lisa Kramer, Rafael LaPorta, Nils Rudi, Petter Rudi, Rob Stambaugh (the editor), Jeffrey Wurgler, participants at the 2005 European Finance Association meetings, the 2006 Utah Winter Finance conference, the Caesarea Center 3rd Annual Conference, the 2006 European Financial Management Symposium on Behavioral Finance, the Second Annual Whitebox Advisors Graduate Students Conference, and seminar participants at MIT Sloan, the Norwegian School of Management, and University of Zurich for helpful comments. Julie Wherry provided research assistance on Alex's earlier paper. All remaining errors are our own.


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.