In a recent paper with Robert Gallagher, published in Applied Economics Quarterly, we added to a growing literature that examines the impact on asset prices of mood altering events such as sports results, sunshine levels, daylight hours, public holidays, temperature etc. Specifically, we investigated whether variations in investor mood arising from wins and losses in major sporting events have an impact on stock market returns. We examined the case of Ireland, because its people are passionate about sport, the domestic population is relatively homogenous (rather than divided) in terms of support for Irish teams and individuals in international competition and domestic investors comprise the largest proportion of owners of Irish stocks – all factors which suggest that if a mood effect exists it should show up in this case.
Generally, we did not find a strong link between sports results and stock market returns. Initial results do suggest that in events of particularly high importance, such as knock-out stages of major competitions, losses are associated with negative returns. However, on controlling for indirect economic effects of sporting wins and losses such as on tourism and travel we find that the mood effect is no longer significant.
Dr Niall O'Sullivan is a Senior Lecturer in Economics in UCC.