Behavioral Finance: FIFA World Cup Expectations and Stock Market Success

Abstract

Behavioral finance, defined as the combination of behavioral and cognitive psychology theory with economics and finance to explain financial decisions, has grown in popularity over the last several years. Behavioral finance has also expanded into sports as researchers seek to find and explain anomalies that exist in the stock market. Existing research about sports is mixed, but prior studies have found that FIFA World Cup soccer matches have a statistically significant correlation with stock prices. This study further examines underlying factors that could influence this correlation. Specifically, it introduces an expectations framework and differentiates game outcomes based on whether the team exceeds, meets, or fails to meet expectations. Using regression analysis, the study finds some evidence for this relationship and that failing to meet expectations is correlated with a stock market decline during the World Cup.