JUN 20 - New research suggests big sports defeats can wipe billions off stock markets. Should Europe's exchanges be on alert for depressed traders pressing the wrong buttons after England and Spain's World Cup losses? Melanie Ralph reports.
These fans have waited four years for this. World Cup revelers are hoping their team will score at least one more than the opposition. But what if they don't? The after-effects can reach further than you might think. New research suggests big sporting defeats can cause mini stock market crashes. Alex Edmans of the London Business School and Wharton SOUNDBITE (English) FINANCE PROFESSOR, LONDON BUSINESS SCHOOL AND WHARTON, ALEX EDMANS SAYING: If you look over the course of the world cup so far when England lost to Italy, the market fell 0.4 percent the next day. When Spain had their embarrassing result against the Netherlands the market fell y 1 percent the next day and notice that the broader market, the world markets was flat on these days. If fact you look at the twelve instances so far where we've had a country losing a game, and has an active stock market, in eight of these twelve times we have seen the national market market index fall faster than the world market. Going by this theory, Spain's IBEX should be wallowing in the red after being knocked out of the World Cup. On the contrary, the news of a new King has helped lift Spain's main index. In general, markets have been reveling at all time highs thanks to this lady. Fed Chief Janet Yellen's dovish tone has been giving markets the feel good factor for sometime now. PTC Trying to second guess how markets are driven has been a long debated topic. You have those who are avid believers of technical or fundamental analysis...or a bit of both But with this research showing that half a percent can be wiped off markets after being eliminated from the World Cup...traders will have to add sport into the mix. Last night's England defeat to Uruguay hasn't pushed the FTSE 100 down yet...but could miserable market players threaten to press the wrong button this world cup and send markets plunging? Royal London Asset Managements' Andrea Williams: SOUNDBITE (English) SENIOR FUND MANAGER, ROYAL LONDON ASSET MANAGEMENT, ANDREA WILLIAMS: I suppose there maybe a short term benefit to the Brazilian economy but thereafter its probably not that great. I don't know. I think we're all feeling pretty depressed this morning. Lets hope we don't press the wrong button. Unfortunately, the theory doesn't work both ways...with a win not necessarily meaning a boost for financial markets But no doubt whoever does win the World cup this year, the valuation of their portfolios will the the last thing on their minds.