Stock Markets riding the wave of FIFA World Cup

Posted By : Team SMI

The countdown for the 2018 FIFA World cup has ended and has kicked off in Russia, there is immense excitement in the air. Seeing our favorite team going through phases of losing and winning , the thrills and spills makes us go through a roller coaster ride. Watching Pepe’s strong defence strategies, Messi’s   fierce attacking skills or Manuel Neuer’s excellence in Goal keeping keep us enthralled.

But what makes   football a splendid and an  appealing game? It is the sheer celebration of goals, team work and spirit of winning for the country. As Cristiano   Ronaldo puts it..”Without football my life is nothing” This sums up the beauty and thrill of the game.

Now what does economy  have to say about this game? Does football have the power to transform the economic landscape of a country?  The world cup is associated with having a positive effect on the host’s country’s economy due to the creation of jobs, tourism growth and higher infrastructure investments.

The FIFA world cup 2018 in Russia is expected to lift its economy and drive inflation. Russia is all set to showcase itself as the superpower and reinvigorating areas where the economy has stagnated .

According to facebook,88 million global users made a record 280 million interactions in the form of posts and likes during 2014 FIFA world cup final. With all the excitement around the world, we have an interesting domain of study-Behavioral Finance. This deals with study of psychological factors on the economic decisions. As behavioural economics has expanded, some research indicates that sporting events can impact the stock market. It is worth exploring the relationship between FIFA World cup and Stock Market.

As stock markets reflect the expectations about the economic outlook, it is crucial to think how     does a sporting event like football impact the stock market.

Efficient Market hypothesis is an important theory developed by Eugene Fama in 1970.This is the cornerstone of the concept of market efficiency which states that people behave rationally while making decisions.

One study, ‘ sports sentiments and stock returns’, which examined 1,100 football matches and stock returns in 39 countries found a loss in the elimination stage leading to the national market falling by 0.5% the next day. This goes to say that the game influences the investor moods. A loss in an important match appears to have a larger psychological effect on the investors than a relatively unimportant match.  It is generally observed that most market fluctuations pertain to the effect of World cup losses.

Moods  move markets and moods are influenced by losses than wins. That is the reason we could see both a bullish or bearish market in the FIFA world cup 2018

 

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