The Psychological Impact of Soccer on Local Stock Performance: An Investigation of Investor Sentiment Effects Induced by UEFA Champions League Match Outcomes on Stock Returns of Locally Headquartered Firms, from 1992 to 2013

Harald Hoch

Student thesis: Master thesis


This study investigates the impact of UEFA Champions League match outcomes on stock returns of locally headquartered firms. The sample data of the study reaches from September 1992 till March 2013 and covers nine European cities. The investigation focuses on the behavioral angle of the impact triggered by what is known within behavioral finance as investor sentiment. In this study, I hypothesize that UEFA Champions League matches have an impact on local stock returns: wins lead to positive abnormal returns, and losses to negative. Further hypotheses are (a) a sensitivity of the impact towards certain firm characteristics related to subjective valuation and higher difficulty of arbitrage, (b) a stronger impact for more important matches, i.e. matches at an advanced stage of the tournament, and (c) the existence of a reversal effect on subsequent trading days, inverting abnormal returns initially generated by soccer outcomes. Based on an extensive literature review serving as theoretical fundament, this study applies three different econometrical approaches to test the hypotheses made. The daily stock returns for Amsterdam, Barcelona, London, Lyonnais, Madrid, Manchester, Milan, Munich, and Porto are investigated running individual ordinary least squares (OLS) regressions, joint time series cross sectional (TSCS) regressions, and a time series portfolio approach. The latter constitutes of allocating stock returns of firms located in cities of winning (losing) teams on the trading day following a Champions League match to a winner (loser) portfolio and then running time series regressions on these portfolios. The results for the individual and joint regressions are very inconsistent and predominantly insignificant. The findings of the portfolio regression approach are somewhat more consistent but lack significance as well. However, firm characteristics do seem to influence the impact of sentiment effects and hence support the hypothesis regarding sentiment-sensitivity of certain stocks. Furthermore, important games show conditional upon significance a stronger effect on stock returns. Finally, only few signs of a potential reversal effect could be found, too few to draw general inferences. Overall, there are very few consistent and significant results to discuss in the light of existing literature and previous studies, which is why a detailed analysis on the limitations of this study and potential sources of ambiguity is conducted. Ultimately, based on the findings of this study suggestions for future research on investor sentiment in relation to soccer outcomes are presented.

Publication date2013
Number of pages174