According to National Football Game between Investor Sentiment and Stock Market Reaction
Authors:   Asia-Europe Perspective Association, Lee Hyunjung , Byun Jongcook 
Published: June 2018

The traditional financial theory states that all investors undertake rational decision-making which are dependent on risks and benefits. However, in reality, we see those investors involved in financial decision-making often influenced by 'psychological convenience'. This study examines the sports-induced effect on the stock market and the behavioral response of investors. This analyzes the link between psychological 'behavioral biases' to the capital asset pricing. The main assumptions on the investor sentiment variables are as follows; First, it must create substantial mood-swing effects on national level that would in turn affect asset-pricing. Second, the effect must encompass the outliers and those outliers who invest in the stock market. Third, the outcome of the investors response must be in unity. The international football match is one of the sports game which satisfies all three assumptions. And this study is based on the 'World Cup' where we will look at how national interest has affected the stock price. Similarly, we will look at other events such as Asian Cup and Olympicto find their effects on the stock market. We have investigated from 2002 World cup series starting from 02/01/2002 till 31/08/2012 (10 years 8 months) and we used KOSPI's closing price for checking daily stock returns. We have selected 4 groups from professional football club owners, sports marketing sector, distributors and food &beverage industries. These groups were selected as they are highly in correlation to the sports industry and will be useful to follow the before- and after-effects of the international sports match, not only on people's interest but their behavioral difference due to psychological effects towards the stock market. The post-analysis of the market’s response was not as expected and did not show any correlation to the international football match results during the analytical period. However, these may result from the mere interest of the public that does not affect the investment psychology or on the day of match,there was a mixture of games that investors may take an interest and those that may not. KOSPI’s response towards the major football matches, such as the World cup, showed relatively significant correlation in stock returns at levels close to 5% confidence interval. Although the correlation between the wins and losses was not shown significant, the abnormal rate of return was more decreased after the losses than the wins. These results were the same in both preliminary and the World cup, which means that the loss effect is existing at some degree in the Korean market. To test the hypothesis that the international sports game affects the sports-related industries’ with an increases of interest from the public, we have divided and analyzed the industries in 4 sectors. The analysis show that during the whole match season, firms in distribute industries were affected positively in the abnormal returns. Interestingly, at the world cup preliminary match, there was positive abnormal return in losses than in the wins. The food and beverage industries showed positive abnormal return, and this result was consistent in the preliminary match. The result of regression analysis showed the similar results in the mean difference analysis. The abnormal rate of return was relatively higher in the winning gaame than the losses. In the case of the world cup, the regression coefficient of companies' group with football team was 0.217 (t=2.072), while the coefficient of sports-related industrial group was 0.036 (t=3.939). This tells that the public interest in world cup finals indeed affect more positively than that in the other games in the stock market.