Date
18 September 2018
Major international sporting events such as the ongoing FIFA World Cup in Russia could have major financial repercussions that reach far beyond the playing field, according to researchers. Photo: Reuters
Major international sporting events such as the ongoing FIFA World Cup in Russia could have major financial repercussions that reach far beyond the playing field, according to researchers. Photo: Reuters

How the World Cup could impact stock markets

A recent study shows that a loss by the England national football team in the 2018 FIFA World Cup in Russia had the potential to wipe tens of billions of pounds off the London stock market.

Alex Edmans, a professor of finance at the London Business School, led a study to analyze 1,100 football matches and stock market performances in 39 countries.

The research showed that a loss by a national team had a negative impact on the country’s financial markets. This is particularly true in major games such as the ongoing FIFA World Cup.

Also, the loss of a match had a greater impact on financial markets in such nations as England, Germany, France and Spain where the sport is particularly popular, according to the study.

Take the 2014 World Cup for example. When England lost 1-0 to Italy, the FTSE slipped by 0.4 percent while other markets were flat. When France lost to Germany in the quarterfinal, the benchmark CAC 40 Stock Market Index slumped 1.4 percent.

“Sport is an emotional topic for millions of people, including professional and personal investors,” Edmans said. “Their trading decisions are affected by mood, so the performance of a national team in an international competition can have major financial repercussions that reach far beyond the playing field.”

Since China failed to make it to the ongoing World Cup, Chinese investors have at least one less thing to worry about.

It’s also interesting to note that while big countries like the United States, China and India are absent from the game, small nations such as Iceland, Panama and Serbia are performing quite remarkably well in this year’s Word Cup.

The US is the world’s largest economy and leading technology power, China has the biggest population and the second-largest economy, while India has the second-largest population.

All three nations have failed to make it to the World Cup this year, which just goes to show that population, money or technology may not be that important in the football world.

The full article appeared in the Hong Kong Economic Journal on June 22

Translation by Julie Zhu

[Chinese version 中文版]

– Contact us at [email protected]

RT/CG

Hong Kong Economic Journal columnist

EJI Weekly Newsletter

Please click here to unsubscribe