Study blows the whistle on market reaction to World Cup competition
THE World Cup kicks off in Russia today and investors should be warned that financial markets tend to act like any emotional soccer fan during the matches – they go quiet and nervy and don’t like losing.
More than two-thirds (43) of the 64 games in this year’s tournament will be played during European or Latin American trading hours, which has been shown to significantly change market behaviour.
During the 2010 World Cup in South Africa – the last to have similarly timed matches to those in Russia – stock market trading volumes dropped an average of 55 percent when the country’s teams were playing, according to a study.
In soccer-mad Brazil and Argentina the reduction was even more pronounced at 75 percent and 80 percent respectively. It fell 38 percent in Europe and 43 percent in the US, while big moments like goals cut activity a further 5 percent.
“People are distracted so it is bound to happen again,” said Michael Ehrmann, the European Central Bank’s head of monetary policy research and co-author of the analysis.
The original study, which looked at 15 major countries, found trading volumes dropped by a third on average even when a market’s own team wasn’t playing.