| Football results kick share prices: Markets cheer soccer wins, and take a dive after losses. |
When England were knocked out of the 1990 World Cup, the stock market fell by 1%. The ups and downs of the UK stock market mirror the triumphs and disasters of the England football team, economists have found. England's performance in the semi-finals of the Rugby World Cup this Sunday may have a similar impact. A bad result could see share prices tumbling when trading opens on Monday morning. "I wouldn't discount the possibility of connections with the City of London, and it'll be a major disappointment if England don't win the tournament," says Bill Gerrard of Leeds University Business School, UK1. In the United States, sport revolves around cities, so the Superbowl, say, is unlikely to influence the Dow Jones. Gerrard's team tracked shares in the 100 biggest UK companies on the day after 210 England football games between 1984 and the end of last year's World Cup. Significant increases in share prices followed good results. Defeats usually preceded drops. Draws came somewhere in the middle. Random changes are the norm. The more important the game, the bigger the effect. Markets responded more to matches in the World Cup and European Championship than to friendlies. A win, and they rose 0.3% on average. A defeat led to a 0.4% downturn. The day after Germany put England out of the 1990 World Cup on penalties, the stock market fell by 1%. Nonetheless, the quantities of money in football are relatively minor, cautions John Goddard, who studies the economics of sport at the University of Wales, Swansea. "The cultural importance of football is out of all proportion to its economic importance," he says. Sporting chance Some of the effect may come through a direct influence on spending, says Gerrard. A nation's continued presence in a tournament leads to more money being spent in that country on drink, eating out, football memorabilia, tickets for domestic matches and so on. Elimination brings this spree to an end. The cultural importance of football is out of all proportion to its economic importance, John Goddard, University of Wales A good result also affects traders' moods. Buoyed brokers are more likely to behave bullishly. In the same way, the market dips on Monday morning, and perks on Friday afternoon. These psychological influences of sport on traders are probably more economically important than supporters' expenditure, says Goddard. References Ashton, J. K., Gerrard, B. & Hudson, R . Economic impact of national sporting success: evidence from the London stock exchange. Applied Economics Letters, 10, 783 - 785, doi:10.1080/1350485032000126712 2003). |Article| |
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