Portugal bested Denmark 3-2 today in a nail-biting Group B Euro 2012 match, thanks to a stunning goal by substitute Silvestre Varela. Without knowing it, Varela may have also dealt a blow to the Copenhagen stock market.
A study out of MIT, Dartmouth and the Norwegian School of Management finds a country’s stock market declines significantly after the home team loses a soccer match.
“Elimination from a major international soccer tournament is associated with a next-day return on the national stock market index that is 38 basis points lower than average,” say the authors.
The study controlled for the pre-game expected outcome, and found market drops weren’t driven by economic factors, such as reduced productivity or lost revenues.
“We also document that the effect is stronger in small stocks, which other studies find are disproportionately held by local investors and more strongly affected by sentiment.”
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The study concludes market returns are stomped by changes in investor mood.
Similar dips were charted after losses in international cricket and rugby matches. Soccer had the greatest effect, however, because results influence the mood of an entire country, while sports like hockey and baseball are usually contested locally rather than nationally.
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Unfortunately for Portugal, the researchers found no evidence of a market uptick after a win.