(Update fifteen July)
The 2014 World Cup is forthwith over. After Argentina's loss inward the final, its marketplace position was upward 0.2%, underperforming the globe index which rose past times 0.6%. Germany's index rose 1.2% - the biggest gainer amid the major European indices.
Excluding the anomalous Brazil defeat (which is explained below), out of the 39 losses past times a reason alongside an active stock market, 26 (= 2 thirds) were followed past times the national marketplace position underperforming the globe market. Influenza A virus subtype H5N1 loss was followed past times underperformance past times 0.2% on average; a loss past times the "big seven" soccer nations (England, France, Germany, Italy, Spain, Argentina, Brazil) was followed past times underperformance past times 0.4% on average.
Thanks to everyone who followed this postal service equally the World Cup unfolded. Influenza A virus subtype H5N1 serial of iii interviews that I did on CNN on the trial of the 2014 World Cup on stock markets is here.
(Update xi July)
So far this World Cup, most defeats receive got been met past times national stock marketplace position declines. Indeed, Holland's marketplace position barbarous past times 1.7% on Th after existence eliminated past times Argentine Republic on Wednesday, piece the globe marketplace position barbarous solely 0.7%. But, after Brazil's 7-1 humiliation past times FRG on Tuesday, the stock marketplace position rose 1.8% on Th (the marketplace position was unopen on Wednesday), piece the globe marketplace position barbarous 0.4% over Wed as well as Thursday. Surely this disproves the theory?!
Actually, the Brazil province of affairs has an interesting twist. Here, the marketplace position rose because the defeat was as well as then bad that investors mean value it significantly increases the chances that socialist President Dilma Rousseff volition locomote ousted inward October's elections as well as locomote replaced past times Aecio Neves, the leader of the to a greater extent than pro-business PSDB party. The economic scheme has been mired inward stagflation nether Rousseff's presidency. Her popularity may locomote peculiarly tied to the soccer squad because she chose to pass billions on stadiums for the World Cup instead of keeping her pre-election promises to pass on schools, hospitals, as well as full general infrastructure.
Is this only clutching at straws to brand an excuse for a major contradictory information point? In fact, this hypothesis was predicted fifty-fifty before the start of the World Cup. UBS analysts argued that a Brazilian leave of absence would boost the stock marketplace position past times hindering Rousseff's re-election bid, as well as Brazil's Ibovespa stock index had risen 19% from a depression on March xiv due to speculation that the economy's miserable functioning would atomic number 82 to her existence ousted. Overall, out of the 38 losses past times a reason alongside an active stock market, 25 receive got been followed past times the national stock marketplace position doing worse than the globe market.
Moreover, the stock marketplace position increment upon seemingly bad tidings is consistent alongside a to a greater extent than full general phenomenon studied inward 1 of my other papers, alongside Itay Goldstein (Wharton) as well as Wei Jiang (Columbia). Typically, nosotros mean value that a high stock cost suggests that the CEO is doing well. But inward fact, a high stock cost may propose that the CEO is doing badly - as well as then badly that investors mean value that the trouble solid volition locomote the target of a hostile takeover, as well as and then bid upward the price. Thus, there's an interesting two-way human relationship betwixt prices as well as existent decisions. Influenza A virus subtype H5N1 depression cost may trigger a corrective activity (e.g. hostile takeover of a CEO, replacement of a President) - but the expectation of the corrective activity drives the cost up.
Indeed, Commerzbank was a takeover target to a greater extent than or less the fiscal crisis due to its miserable performance. It was believed to receive got adopted a rather odd takeover defense forcefulness - it spread rumors that it was a takeover target, to increment its stock price, preventing a takeover from ultimately occurring! Thus, stock prices may locomote self-defeating - prices foreclose the real actions that they anticipate.
As Shakespeare's Hamlet said, "thinking makes it so". But inward fiscal markets, "thinking may come inward non so".
(Update ix July)
At the fourth dimension of writing, FRG is the solely major European stock marketplace position that's upward - all other European stock markets are downwardly due to negative economical news. Luckily for Brazil, their stock marketplace position is unopen for a world vacation to rank a constitutional revolt inward 1932.
(Updated 8 July)
The 2014 World Cup is forthwith over. After Argentina's loss inward the final, its marketplace position was upward 0.2%, underperforming the globe index which rose past times 0.6%. Germany's index rose 1.2% - the biggest gainer amid the major European indices.
Excluding the anomalous Brazil defeat (which is explained below), out of the 39 losses past times a reason alongside an active stock market, 26 (= 2 thirds) were followed past times the national marketplace position underperforming the globe market. Influenza A virus subtype H5N1 loss was followed past times underperformance past times 0.2% on average; a loss past times the "big seven" soccer nations (England, France, Germany, Italy, Spain, Argentina, Brazil) was followed past times underperformance past times 0.4% on average.
Thanks to everyone who followed this postal service equally the World Cup unfolded. Influenza A virus subtype H5N1 serial of iii interviews that I did on CNN on the trial of the 2014 World Cup on stock markets is here.
(Update xi July)
So far this World Cup, most defeats receive got been met past times national stock marketplace position declines. Indeed, Holland's marketplace position barbarous past times 1.7% on Th after existence eliminated past times Argentine Republic on Wednesday, piece the globe marketplace position barbarous solely 0.7%. But, after Brazil's 7-1 humiliation past times FRG on Tuesday, the stock marketplace position rose 1.8% on Th (the marketplace position was unopen on Wednesday), piece the globe marketplace position barbarous 0.4% over Wed as well as Thursday. Surely this disproves the theory?!
Actually, the Brazil province of affairs has an interesting twist. Here, the marketplace position rose because the defeat was as well as then bad that investors mean value it significantly increases the chances that socialist President Dilma Rousseff volition locomote ousted inward October's elections as well as locomote replaced past times Aecio Neves, the leader of the to a greater extent than pro-business PSDB party. The economic scheme has been mired inward stagflation nether Rousseff's presidency. Her popularity may locomote peculiarly tied to the soccer squad because she chose to pass billions on stadiums for the World Cup instead of keeping her pre-election promises to pass on schools, hospitals, as well as full general infrastructure.
Is this only clutching at straws to brand an excuse for a major contradictory information point? In fact, this hypothesis was predicted fifty-fifty before the start of the World Cup. UBS analysts argued that a Brazilian leave of absence would boost the stock marketplace position past times hindering Rousseff's re-election bid, as well as Brazil's Ibovespa stock index had risen 19% from a depression on March xiv due to speculation that the economy's miserable functioning would atomic number 82 to her existence ousted. Overall, out of the 38 losses past times a reason alongside an active stock market, 25 receive got been followed past times the national stock marketplace position doing worse than the globe market.
Moreover, the stock marketplace position increment upon seemingly bad tidings is consistent alongside a to a greater extent than full general phenomenon studied inward 1 of my other papers, alongside Itay Goldstein (Wharton) as well as Wei Jiang (Columbia). Typically, nosotros mean value that a high stock cost suggests that the CEO is doing well. But inward fact, a high stock cost may propose that the CEO is doing badly - as well as then badly that investors mean value that the trouble solid volition locomote the target of a hostile takeover, as well as and then bid upward the price. Thus, there's an interesting two-way human relationship betwixt prices as well as existent decisions. Influenza A virus subtype H5N1 depression cost may trigger a corrective activity (e.g. hostile takeover of a CEO, replacement of a President) - but the expectation of the corrective activity drives the cost up.
Indeed, Commerzbank was a takeover target to a greater extent than or less the fiscal crisis due to its miserable performance. It was believed to receive got adopted a rather odd takeover defense forcefulness - it spread rumors that it was a takeover target, to increment its stock price, preventing a takeover from ultimately occurring! Thus, stock prices may locomote self-defeating - prices foreclose the real actions that they anticipate.
As Shakespeare's Hamlet said, "thinking makes it so". But inward fiscal markets, "thinking may come inward non so".
(Update ix July)
At the fourth dimension of writing, FRG is the solely major European stock marketplace position that's upward - all other European stock markets are downwardly due to negative economical news. Luckily for Brazil, their stock marketplace position is unopen for a world vacation to rank a constitutional revolt inward 1932.
(Updated 8 July)
In an before post I summarized my paper (with Diego Garcia as well as Oyvind Norli) which shows that international football game defeats atomic number 82 to declines inward the national stock marketplace position index. Controlling for other drivers of stock returns, a World Cup defeat leads to a next-day autumn of 0.4%, as well as a defeat inward the elimination stages leads to a next-day autumn of 0.5%. We also flora that the trial was stronger inward England, France, Germany, Spain, Italy, Argentina, as well as Brazil. Influenza A virus subtype H5N1 brief, humorous, 5-minute verbalize nigh the newspaper is here.
How has this theory played out inward the 2014 World Cup as well as then far? Typically you lot respect that stock marketplace position effects larn weaker after a newspaper is published, because investors are aware of the trial as well as merchandise against it. However, nosotros receive got indeed seen stock marketplace position declines after defeats inward this World Cup. Across all countries alongside a stock marketplace position index, a defeat has led to the index falling past times 0.2% faster than the MSCI World index. Moreover, defeats past times the "big seven" countries (notably England, Spain, as well as Italy) receive got led to declines of 0.5%. Out of the 36 defeats past times countries alongside an active stock market, 24 receive got been followed past times marketplace position declines faster than the MSCI World.
Let's facial expression at some of the most negative stock marketplace position responses:
Kingdom of Spain 1-5 Netherlands. The Castilian marketplace position barbarous past times 1% the adjacent day, piece the globe marketplace position went upward past times 0.1%. This was a crushing as well as surprising defeat past times the reigning globe champions.
England 0-1 Italy. The English linguistic communication marketplace position fell by 0.4%, piece the globe marketplace position was flat.
Japan 1-2 Ivory Coast. The Japanese marketplace position fell by 1%, piece the globe marketplace position was flat. Japan went into the tournament alongside high expectations since the full general consensus was that they had an slow group.
Italy 0-1 Costa Rica. The Italian marketplace position barbarous past times 1.5%, piece the globe marketplace position was flat. This was mayhap the biggest stupor of the World Cup as well as then far, as well as severely jeopardized Italy’s chances of qualifying.
Switzerland 2-5 France. The Swiss marketplace position barbarous past times 0.7%, piece the globe marketplace position was flat. While this loss wasn't also unexpected, the magnitude of the defeat was severe - Switzerland were downwardly 0-5 until tardily inward the game.
Italy 0-1 Uruguay. The Italian marketplace position barbarous past times 0.5%, piece the globe marketplace position was flat. Italy were eliminated from the World Cup.
Japan 1-4 Colombia. The Japanese marketplace position barbarous past times 0.7%, piece the globe marketplace position was flat. Nippon were eliminated from the World Cup. Influenza A virus subtype H5N1 win would receive got seen them through against an already-qualified Republic of Colombia squad that rested several players.
Korea 0-1 Belgium. The Korean marketplace position barbarous past times 0.3%, piece the globe marketplace position was upward 0.2%. Korea were eliminated from the World Cup past times a Belgian side that rested several players as well as was downwardly to 10 men for one-half of the match.
Nigeria 0-2 France. The Nigerian marketplace position rose 0.3%, piece the globe marketplace position rose 0.7%. Nigeria were eliminated from the World Cup.
France 0-1 Germany. The French marketplace position barbarous past times 1.4%, piece the globe marketplace position barbarous 0.5%. Clash of 2 leading nations inward the quarter-finals, both of which harbored hopes of winning the competition.
However, non every outcome has been consistent alongside the theory. Some losses receive got been accompanied past times stock marketplace position increases, mayhap because these losses genuinely boosted national mood:
Croatia 1-3 Brazil. The Croation marketplace position rose 0.4%, piece the globe marketplace position rose past times 0.3%. This outcome did non worsen Croation national mood, equally they were believed to receive got played good as well as lost to unlucky refereeing decisions.
Bosnia 1-2 Argentina. The Bosnian marketplace position rose 0.5%, piece the globe marketplace position was flat. This was Bosnia's start appearance inward a World Cup as well as the consensus was they played real well.
Australia 2-3 Netherlands. The Australian marketplace position rose 1.5%, piece the globe marketplace position rose 0.9%. Australia's functioning was widely praised past times the press afterwards, inward contrast to the pregnant negative coverage of the squad before the tournament.
Hellenic Republic 1-1 Republic of Costa Rica (3-5 on penalties). The Greek marketplace position rose 0.4%, piece the globe marketplace position rose 0.1%. This was the start fourth dimension Hellenic Republic advanced through the grouping stages as well as and then the nation was happy alongside the team's functioning inward the overall World Cup.
However, at that spot were a pair of losses that did atomic number 82 to a pass upward inward national mood, yet nonetheless were accompanied past times stock marketplace position increases. Clearly, football results aren't the solely element that drives stock returns, because at that spot may locomote some major economical news. For example, when Kingdom of Spain lost 2-0 to Chile, the marketplace position went upward past times 0.7% the adjacent twenty-four threescore minutes menses (while the globe marketplace position rose 0.5%), due to tidings of a novel king.
In addition, at that spot receive got been losses that were accompanied past times stock cost declines as well as thence consistent alongside the theory, but probable these declines were caused past times other factors. For example, when Nigeria lost 3-2 to Argentina, the marketplace position barbarous 0.6% the adjacent day. However, Nigeria had already qualified as well as then the loss wasn't peculiarly painful; the marketplace position pass upward was probable due to the terror laid on inward the working capital missive of the alphabet on the same day.
While at that spot mightiness locomote detail occasions where economical tidings overshadows the mood send on of a football result, these idiosyncratic events volition fifty-fifty out inward a large sample. Thus, the initial newspaper studied 1,100 football game matches (plus 1,500 matches inward rugby, cricket, basketball, as well as H2O ice hockey) to respect the average trial of football game defeats on the stock market. Influenza A virus subtype H5N1 football loss won't atomic number 82 to a stock marketplace position pass upward inward every unmarried case, but it does on average, as well as this has been borne out past times the 2014 World Cup as well as then far.
(Thanks to LBS PhD educatee David Schoenherr for his assist inward gathering the information for this World Cup.)
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