England’s early exit from Euro 2016 ‘could wipe £6bn off stock market’

An early exit of the England team from Euro 2016, which begins on Friday, would wipe £6bn off the stock market in a single day, according to a finance expert.

Alex Edmans, a professor of finance at the London Business School, believes that the effect of football results on the national mood is so strong that it can spill over into the stock market with impacts measured in billions of pounds, reports The Guardian.

He said: “My research shows that a loss in a major football competition can have a profoundly negative effect on investor mood. Share prices are affected not only by fundamentals, but also by emotions. Sports have huge effects on people’s emotions.”

Edmans and his co-authors, from the University of Colorado and BI Norwegian Business School, investigated the link between 1,100 international football matches and stock returns in 39 countries in a paper entitled Sports Sentiment and Stock Returns.

The results showed that being eliminated from a regional tournament such as Euro 2106 led to the national stock market falling by 0.3 per cent the next day.

Edmans said: “When applied to the UK stock market, this translates into a single-day loss of £6bn.”

There is no evidence, however, that there would be a boost to the London stock market were England to get further than expected. Somewhat surprisingly, the Sports Sentiment paper found no effect of a win in any sport, including cricket, rugby and ice hockey.

Edmans said: “One reason could be that sports fans are notoriously over-optimistic about their team’s prospects. If fans go into each game expecting they’ll win, there’s little effect if they do win, but they become depressed if they lose.

“Another is the asymmetry of the competition. Winning an elimination game merely sends you into the next round, but losing leads to instant exit.”