Stock market investors, already battered by the worst quarter since the depths of the eurozone crisis, now face a make-or-break England rugby fixture that could wipe billions off share prices.
If England are eliminated from the Rugby World Cup by Australia on Saturday, about £3bn is likely to be knocked off the stock market when trading resumes on Monday, according to an academic at London Business School.
Alex Edmans, professor of finance at the school, said his research showed that if a national team is eliminated from an international tournament it makes investors fed up and pessimistic the next day.
After Wales beat Fiji, England have to win against Australia on Saturday to stay in the competition. A defeat for a national rugby team triggers a fall of 0.15% the next day – about £3bn when applied to the UK stock market, he found.
Edmans said: “A defeat makes investors more negative about life in general. If England were to lose, they wouldn’t just be negative about the England rugby team but also about economic outcomes in general.”
Stock markets are already in a febrile state. Since the end of June, the UK’s FTSE 100 index has lost £117bn of its value – its worst performance since the three months to September 2011 when the eurozone crisis was at its worst.
Edmans tested the impact of international football results on stock returns in 39 countries and found that markets typically fall about 0.5% the day after a national team is knocked out of a big competition. The effect was less for rugby but still statistically significant, Edmans said.
There would be no rise in the stock market as a result of an England win, he added. This is partly because supporters are wildly over-optimistic about their team’s chances, so a loss is a bitter blow whereas a win is expected.
Edmans’ research, conducted with academics from the University of North Carolina and the Norwegian School of Management, found that markets fell more after a national defeat depending on the importance of the tournament and the stage at which the game took place. The effect was strongest in England, France, Germany, Italy, Spain, Argentina and Brazil.
This article was written by Sean Farrell, for theguardian.com on Thursday 1st October 2015 19.34 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010