The race that stops the equity market

Abstract

The Melbourne Cup is a major horse racing event that is colloquially known as the ‘race that stops the nation’ in Australia. We use constituent stock intraday volume data on the Australian Securities Exchange S&P/ASX 200 equity index from 2003 to 2013 within a regression framework to examine whether this major horse race reduces investor attention. Results show that trading volume on the Australian equity market is significantly reduced during and immediately surrounding the running of the Melbourne Cup, supporting the claim that this is the ‘race that stops the equity market’.

Keywords:

• investor attention
• stock market
• volume
• sporting events

JEL Classification:

• G10
• G14

Notes

¹ Numerous other studies examine sporting events and the impact the events have on stock markets: Berman et al. (2000) examine the impact of the 2000 Sydney Olympics announcement on the Australian stock market, Ashton et al. (2003) analyse the impact the performance of the England football team has on the FTSE 100 and Edmans et al. (2007) investigate the effect of international soccer results on the respective stock markets for 39 countries.

² Intraday volume data were only available from 2003 onwards.

³ The Melbourne Cup race start time in 2003 and 2004 was 3:10 pm and post 2005 it was 3:00 pm.

⁴ As Melbourne Cup day is a public holiday in the state of Victoria, we look at intraday volume at and immediately surrounding the Melbourne Cup race rather than comparative daily volumes.

⁵ The Melbourne Cup is held on the first Tuesday in November and coincides with the Reserve Bank of Australia’s monetary policy announcement. Pre-2008, the announcement was made at 9:30 am and post-2008 the announcement was made at 2:30 pm. To control for the announcement effect on volumes, we separate the study into a pre- and post-2008 period. Our results are robust in both sub-periods.