Reflected Glory and Failure: International Sporting Success and the Stock Market

Motivated by psychology research showing that individual mood is affected by weather and daylight savings changes respectively, Saunders (American Economic Review 83, 1337-1345, 1993) and Kamstra et al. (American Economic Review 90, 1005-1011, 2000) find that stock prices are systematically related to these economically-neutral events. Another large psychology literature documents a similarly-strong relationship between sporting team success and fan self-esteem, a finding which raises the possibility that stock prices also respond systematically to sports results, at least in markets where the majority of investors support the same team. However, applying this hypothesis to New Zealand - a small country with a single dominant sport whose primary contests are international in nature - it is found that stock return behaviour is independent of the success of the premier national sports team. Thus, irrational investor responses to sporting contest results are transitory at best.