The Football Performance Effect on Stock Returns – An Event Study of Publicly Listed Football Clubs

Abstract

We study the relationship between sporting performance and abnormal returns in football stocks. Based on a sample of 2,146 matches from nine European football clubs during 2014 through 2018, we find a positive stock market response after wins and a negative response after draws and losses. Using betting odds to measure market expectations, we find that abnormal returns are more precisely explained by the degree of expected performance. Losing in the European tournaments results in an even more negative abnormal return, and positive abnormal returns are only realized after highly unexpected outcomes. We also find evidence of the home advantage, even when taking betting odds into account. Furthermore, our results indicate that turnarounds in performance yield greater abnormal returns. This means that a more positive stock market response follows when performing above expectations after underperforming in the previous match, and vice versa. Positive abnormal returns are also related to consecutive wins, while consecutive losses result in negative abnormal returns, though weaker than after turnarounds in performance. Additionally, the size of the abnormal returns seems to be time-dependent and increasing throughout the season.