Will World Cup Success Lift the Economic Gloom?

Mon 14th Jun 2010 | Money & Finance

The success or failure of England in the World Cup is likely to have a significant influence on the London stock market according to a group of researchers.

Research examining the link between the FTSE 100 index and England’s international football results reports, on average the FTSE will fall on the day after an England loss, rise slightly, on the day after an England win and fall slightly on the day after a drawn match. 

The research carried out by academics from the Universities of Bangor, Leeds and Newcastle examined whether on average returns from the FTSE 100 index changed significantly the day after 290 England international football games occurring between 1984 and 2009. It is reported the largest gains and falls in the stock market occurred after tournament games such as the World Cup. Slightly lower share price gains and losses are reported after friendly and qualifying matches. Further the effect of England’s performance on the stock market has been declining overtime. The level of stock market gains after England winning at football has been declining noticeably since 2004. The effect of an England loss at football on next days trading persists over time and remains negative on average.  

The effect of international sporting results on stock markets is well documented and is often attributed to the psychological effects of the result. Professor Robert Hudson from Newcastle University Business School explains “Stock brokers, like everyone else can be carried away in the depression associated with an England loss at the World Cup”.

If England do lose too many World Cup matches and face an early departure from South Africa, this could also have some real negative business effects. Alcohol, media, leisure and sportsware industries may all benefit from a prolonged England World Cup campaign. If England do get knocked out of the World Cup early, share prices could fall. Dr John Ashton from Bangor Business School commented “If England are eliminated from the World Cup early, it may be a good day to look for bargains on the stock market”.

This study updates past research by the same authors considering the link between share prices and international football results undertaken prior to the 2002 world cup. This update of the academic research is forthcoming in the journal Applied Economics. 

Mean FTSE Returns on the day after England football results.  

Full Data Period (6^th January 1984 to 10^th July 2009)

Unconditional Daily Return on the FTSE 100 Index.

Mean 0.0279%, Median 0.0537%, Trimmed Mean 0.0383%

Mean FTSE Returns on the day after England Elimination from Major Tournaments

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