Journal of Financial and Quantitative Analysis Vol. 45 No. 2 2010
Exploitable Predictable Irrationality: The FIFA World Cup Effect on the U.S. Stock Market
Abstract
In a recently published paper, Edmans, García, and Norli (2007) reveal a strong association between results of soccer games and local stock returns. Inspired by their work, we propose a novel approach to exploit this effect on the aggregate international level with the following three unique features: i) The aggregate effect does not depend on the games’ results; hence, the effect is an exploitable predictable effect. ii) The aggregate effect is based on many games; hence, it is very large and highly significant. We find that the average return on the U.S. market over the World Cup’s effect period is – 2.58%, compared to +1.21% for all-days average returns over the same period length. iii) Exploiting the aggregate effect is involved with trading in a single index for a relatively long period.
- DOI
- 10.1017/s0022109010000153
- Volume
- 45
- Issue
- 2
- Pages
- 535-553
- Language
- en
- Sources
- openalex bibtex:phds-export.bib crossref