THE genius of Wayne Rooney, a scrambled win in a friendly against Argentina and the eternal optimism of the football fan are fuelling the nation’s hopes that England might, finally, be about to regain the World Cup. But if you believe that next summer’s tournament in Germany will end with the familiar tears and missed penalties, spare a thought for investment bankers, who will be about to lose a fortune.

Research shows that there is a clear link between stock market performance and success in international football matches. When the national team loses, the mood of investors changes and the market falls. But there is no corresponding surge in prices when the team wins.

The effect is more pronounced in countries where the passion for football is strongest, and even more marked in World Cup knockout matches. Other international sports exert a similar, but less dramatic, impact on the markets.

Professor Diego García, of the Tuck School of Business at Dartmouth College, in the United States, and co-author of the research, said: “No other type of regular event has such a decisive impact on the mood of a nation as when their national football team loses a game.”

With Øyvind Norli, from the Norwegian School of Management, and Alex Edmans, of MIT, Professor García documented the impact on the stock market of more than 1,100 football matches between 1973 and 2004, and more than 1,500 cricket, rugby, ice hockey and basketball matches. They found that stock markets fall 39 basis points on average after a World Cup elimination defeat, and 29 basis points after an elimination defeat in other tournaments. “People often believe that economics is a rational and calculated science,” they say. “Studies such as ours show that there are forces influencing our economies that have little to do with rational thought.

“Sunday’s match could potentially have an important effect on Monday’s opening stock prices.”

The phenomenon is most noticeable in countries where a large proportion of the population follows football, namely England, France, Germany, Italy and Spain. These five countries account for 79 per cent of European football market revenue. The effect is also clear in other southern European nations, and in South America.

Previous studies of mood and aggregate stock prices have examined physical or seasonal phenomena, such as the weather or lunar cycles, and found similar effects on the markets. The studies have demonstrated that the success or failure of a football team can strongly influence its fans’ sense of self-esteem, their health and their outlook on life in general. Hospital admissions for heart attacks increased by 25 per cent during the three-day period starting on June 30, 1998 — the day that England lost to Argentina in the World Cup. American football games and Canadian ice hockey games have been linked to increased murder and suicide rates.

PRICE OF FAILURE

Figures equal percentage change in stock prices

England 1-2 Argentina World Cup 1986 -0.66

England 1-3 USSR EC* 1988 -0.31

England 1-1 W Germany** World Cup 1990 -1.04

England 1-2 Sweden EC* 1992 -1.33

England 1-1 Germany** EC* 1996 -0.52

England 1-2 Argentina World Cup 1998 +1.28

England 2-3 Romania EC* 2000 -0.66

England 1-2 Brazil World Cup 2002 -1.32

England 2-2 Portugal** EC* 2004 -0.08

*European Championship
** Lost on penalties

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