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World Cup Effect on Stock Market
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niuyear
Supreme |
28-Apr-2010 14:48
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Casinos sure to provide rooms to watch world cups..
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iwonder
Veteran |
28-Apr-2010 14:43
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This is usually the norm yearly but take note: according to an article published in the Straits Times, Fengshui experts predict that this year would be different..... Well, we just have to see whether it materialize
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AK_Francis
Supreme |
28-Apr-2010 11:35
Yells: "Happy go lucky, cheers." |
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STI diarrhoea, shit 41.93, mins ago. Ha ha, million dollars Q. The catch is, if nothing to sell by then, when can we buy prior to that? Some sifu said, look at SSE. Quite true, it down STI also down leh. The focus now is at Greece. Be alert, may not need to wait till Soccer season then Sell, if holding bulk of stocks in hand. Above r solely AK views, no call for anything. Go kopitiam liao. Cheers.
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wishbone
Master |
28-Apr-2010 11:21
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This is definitely true to some extent. Many football fans/punters are also share investors/traders. All have limited resources. Also if they are betting on the games, many will stay late in the night and early morning to watch the matches. So they will likely sleep in the day or wake up late in the morning or early afternoon. Many will also likely to skip the stock market.
Not to forget May is the month "Sell your stocks and go away". World cup starts on the 2nd week of June. Schedule can be found in Fifa website.
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freeme
Elite |
28-Apr-2010 11:05
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Sell b4 world cup is 1wk b4 or?
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FearValueGreed
Master |
28-Apr-2010 00:23
Yells: "Long Term Timing X Capital = Well Deserved Payout" |
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Sell before World Cup Never wrong |
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senecus
Veteran |
27-Apr-2010 23:39
Yells: "Market Fortune Telling - Senior MFT" |
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Heart is strong but flesh is weak...... |
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SupremeA
Veteran |
27-Apr-2010 23:37
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Singapore don't have team in world cup. And maybe cannot even watch. So we're safe lol | ||||
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louis_leecs
Elite |
27-Apr-2010 23:32
Yells: "half cash" |
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WHO WANNA FOLLOW ME GO TO BUKIT TIMAH HILL ,,,,,,,,,,,,, |
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senecus
Veteran |
27-Apr-2010 23:10
Yells: "Market Fortune Telling - Senior MFT" |
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Hold on to the rein......will be interesting. 
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pharoah88
Supreme |
27-Apr-2010 18:01
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Tuesday: 27 APRIL 2010 CLOSING TODAY is prOfit TAKiNG DAY. STi 2991.680 -10.940 |
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freeme
Elite |
27-Apr-2010 17:58
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So do you guys believe in this theory? N if most believe on this, then market will sell out as early as 1-2 wks before world cup.. N being chinese love to gamble alot, China Market might get whack down hard as they cash out n bet on world cup instead.. Any other views? |
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freeme
Elite |
27-Apr-2010 17:53
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WHEN Tiger Woods apologised for his marital infidelity and 'repeated irresponsible behaviour' in a global broadcast at 11 am (ET) on Feb 19, many Wall Street traders apparently stepped away from their trading screens and turned their attention to the television broadcast instead. New York Stock Exchange volume fell to about one million shares, the lowest level of the day at the time, in the minute that Woods began a televised speech from Ponte Vedra Beach, Florida, headquarters of the US PGA Tour. Trading shot to about six million when the speech ended, the highest for any period except just after the exchanges opened, data compiled by Bloomberg show. Trading on all US bourses declined during the press conference, falling to 456 million shares from an average of 576.8 million during the five previous 15-minute segments, Bloomberg data show. So how does World Cup, which takes place once every four years in the months of June and July, impact our local market? A friend raised this question, and I've decided to look into it. And there is an impact. Outcomes of popular sports have the power to affect the emotional well-being of fans, and as such, they do colour the decision-making process of this group of people. Moreover, if a large enough group of people are affected, their collective decisions will have an effect on the pricing of assets. In their paper titled Sports Sentiment and Stock Returns, Alex Edmans, Diego Garcýa, and Øyvind Norli found a significant market decline after soccer losses. For example, a loss in the World Cup elimination stage leads to a next-day abnormal stock return of -49 basis points in the losing country's bourse. This loss effect is stronger in small stocks (which are held mostly by the locals) and in more important games, and is robust to methodological changes. They also document a loss effect after international cricket, rugby and basketball games, but the effect is not as great as in soccer. The winning countries, however, do not register any abnormal gains in their domestic bourses. Unfortunately, our data only goes back to 2000. So we can only look at the past two World Cup events - not quite a big enough sample to form any robust conclusion. But let's take a look anyway at what the data showed. In the first chart, I plotted the monthly trading activities on the Singapore Exchange in 2002. Here, you can see that the volume for June fell sharply compared with the previous month. In terms of units traded, the fall was 44 per cent. There was a rebound in July, but then interest in the market continued to wane for the rest of the year. So, the poor volume could be due to poor investment sentiment not related to the World Cup. The second chart shows the trading pattern in 2006. Here, we can also see a more pronounced lull in the market in June and July. Those two months were the least active months for the year. But are June and July typically the quieter months for stocks? In the third chart, I plotted the median monthly trading volume on SGX from 2000 to 2009. The median trading volumes for June and July in 2002 and 2006 were then presented next to the median for those two months from 2000 until 2009. Here, you can see clearly that the June and July market activities in the World Cup years were more subdued than non-World Cup years. More importantly, how about returns? In the fourth chart, you can see that in the past two World Cups, the returns in June and July were significantly lower than the median returns for those two months between 2000 and 2009. If the data is anything to go by, then it seems the World Cup does have a significant impact in at least distracting market players from participating in the trading, and which perhaps might lead to prices drifting lower. Hence, traders may want to reduce their equity exposure before the start of the World Cup games. This has actually been proven to be a profitable strategy in another study. Taking the work of EGN further, that losses of important soccer matches have a significant negative effect in the losing countries' local stock markets, whereas victories do not have a significant effect, Guy Kaplanski and Haim Levy devised a way to profit from this predictable outcome. Their main hypothesis is that a lot of foreigners own and trade US shares. About one-third of all equity transactions in the US in 2006 involved at least one foreign investor on one side. Investors from the UK held US$390 in US equities in 2006. Belgium and Luxembourg had US$241.3 billion and the Netherlands US$173.7 billion. So, during the World Cup period, all the losing fans' foul mood will in aggregate have a negative impact on the US market. The negative effect from the sour mood of fans of the losing team on the US market will be predictable and exploitable, because it doesn't depend on the outcome of the game. Furthermore, as the World Cup progresses, the number of losing countries increases until eventually there is only one winning country and dozens of losing countries. The cumulative negative effect of 30 losing countries in numerous games on the US market will be large, highly significant and long lasting, said the researchers in their report Exploitable Predictable Irrationality: The Fifa World Cup Effect on the US Stock Market. Indeed, they found that the average return on the US market over the World Cup's global effect days is -2.58 per cent, compared with +1.21 per cent for all-days average returns over the same period length. Without doing anything, a US$1 invested in January 1950 would grow to US$4,386 by the end of the study in December 2007. However, if someone were to invest that US$1, and get out of equities entirely during all the World Cup periods in that time, his pot would be a bigger US$6,948 by the end of 2007. Taking into account a 0.5 per cent transaction cost each way for getting in and out of the market, the amount would be reduced to US$5,978. But that's still substantially higher than the US$4,386 obtained from the buy-and-hold strategy. Given that the Singapore market is said to take its cue from the US market, then perhaps this is another explanation why stock prices here fell during Fifa World Cup. Just for the record, here's how widely the World Cup is watched. According to a Fifa marketing report, the 2006 Fifa World Cup in Germany had a cumulative (with duplicates) television audience of 26.29 billion, with 376 channels showing the event and a total of 43,600 broadcasts across 214 countries and territories. The most watched game was the Italy versus France final, with a total cumulative audience of 715.1 million viewers. Going by how the stock market has performed so far this year, no doubt the World Cup will be much more exciting to watch than the trading screens. |
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