The Olympics, World Cup & World Markets




With the London 2012 Olympics deemed a roaring success, and the Paralympics well underway, we thought it was the perfect time to examine the performance of one's national team, whether it be the England football squad or TeamGB athletes, on world markets.

Guy Kaplanski and Haim Levy, in their January 8th 2010 piece, titled "The Global Effect of the FIFA World Cup on the Stock Market", wrote that not only does the stress of the fans of a losing country lead to extreme local phenomena such as an increase in heart attack rates and changes in workers' productivity, but that the sporting event is also associated with a long lasting global effect on the world stock markets.

Now, the traders here amongst the FinanceInterns team can testify that trading can be a highly charged activity, fraught with tension and psychological battles. However we've always believed our black moods have been brought on by some disastrous trades rather than black moods caused by outside events bringing on bearish sell trades. So, is it the chicken or the egg? Can the sporting losses of one's national team, the knockout from a football World Cup, really affect stock markets?

Looking at it logically

... when a national team is knocked out it will have obvious knock-on negative business effects on industries such as the alcoholic beverages, media and sportswear sectors, so these components of the FTSE 100, for example, will weigh negatively on the index. Yet what about psychological factors?

Researchers from Newcastle University Business School found that the FTSE 100 index of leading shares, "generally goes up if the team wins and goes down following a draw or a defeat," because, "Stockbrokers, like everyone else, can be carried away in the depression
associated with an England loss at the World Cup," according to Professor Robert Hudson.

And there's us, surrounded by our spreadsheets here at FinanceInterns HQ, thinking it was all P/E ratios, cash-flow valuations and complex financial indicators which determined whether a stock was a BUY, a HOLD or a SELL. We've decided we've been wasting our time looking at company balance sheets - we're tearing them up. Next World Cup, if we do get knocked out early, as Dr John Ashton from Bangor Business School commented, "it may be a good day to look for bargains on the stock market". So for the sake of the British economy, we're crossing our fingers - and our toes - that England always win. For the 2014 FIFA World Cup in Brazil it won't just be, "Come on Three Lions," but also, "Come on you FTSE!"



Our FinanceInterns team all currently work in the markets and are sharing their realtime insights with you via our Blog. Some are funny, most are educational whilst others are simply the ventings of some frustrated City folk! We've also go contributions from you out there, our interns. If you'd like to write something then get in touch via our Contact Us page