Dirty TackleWhy you should take a break from investing during the World Cup
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We’re all supporting a country in some fashion during this World Cup, and that means experiencing all the highs and lows that come with a tournament of this magnitude. If you’re a U.S. supporter, you rode the rollercoaster from the high of Clint Dempsey’s opening minute goal to low of Andre Ayew’s tying the goal in the 82nd minute for Ghana to the extreme high of John Brooks’ winning header four minutes from time to steal three points.
It’s the gamut of emotions and usually when our side loses, we don’t think so clearly in the immediate aftermath. This is the case, it seems, for some fans when it comes to dealing with the stock market. It’s not good to take care of your investments right after your team falls, as evidenced by Spain’s 5-1 rout at the hands of the Netherlands last week.
[Photos: World Cup WAGs with and without makeup]
According to Market Watch, Spanish stocks fell 1-percent on Monday, the first day of trading since the loss, which was double the 0.42-percent loss of the entire European market.
A 2007 study by three finance professors showed that there is a relationship between a country’s loss in the World Cup and their respective stock markets taking a dip.
After studying more than 1,100 soccer matches, the researchers found that, on average, a given country’s loss in the World Cup elimination stage is followed by its stock market the next day producing a return that is significantly below average.
Not surprisingly, the researchers could find no rational explanation for the lower returns. They therefore concluded that those diminished returns were caused by the “impact of sports results on investor mood.”
Unfortunately, for those country’s that win, the professors did not find that their stocks rose. So to avoid any sort of rash decision-making, it’s probably best if investors keep their focus on the soccer and not the ups and downs of the market. It will likely save them a good chunk of money.
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