Is there an Olympic gold medal rush in the stock market?

ABSTRACT

Investor sentiment and attention are often linked to the same non-economic events making it difficult to understand why and how asset prices are affected. We disentangle these two potential drivers of investment behaviour by analysing a new data-set of medals for the major participating countries and sponsor firms over four Summer Olympic Games. Our results show that trading volume and volatility are substantially reduced following Olympic success although returns appear to be largely unaffected. Analysis of data from online search volumes and surveys measuring investor sentiment also suggests that the market impact of the Olympics is linked to changes in attention.

KEYWORDS:

• Attention
• sentiment
• Olympic games
• stock market

JEL CLASSIFICATIONS:

• g02
• g14

Acknowledgements

The authors thank Chris Brooks, Laura Veldkamp, Zhi Da, Jeffrey Wurgler, David Hirshleifer, Timothy Loughran, David-Jan Jansen, Daniel Andrei, George Kavetsos, John Ashton, Wolfgang Maennig, Alasdair Brown, Peter Dawson, Robert Hudson, Marc Jones and Thomas Gilbert for their comments on earlier versions of the paper. The authors are also grateful for feedback from the participants of the Research in Behavioural Finance in Rotterdam, the 2014 Behavioural Finance Working Group Conference in London, the Behavioural Models and Sentiment Analysis Applied to Finance Conference in London and of research seminars at University of Edinburgh Business School and Norwich Business School.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. It is surprising that this possibility has not been entertained yet in the financial literature, although it is an idea that has been popular since antiquity. For example, the phrase panem et circenses - bread and circuses, the latter having the meaning of public games and other of mass spectacles - is popular since Roman times as a figure of speech to describe how a major sports event can be used to appease a specific group of people by diverting their attention. The idea is still very popular, as exemplified by Hunger Games, the popular trilogy by Suzanne Collins which was recently turned into a movie.

2. Crosschecks where performed across several websites in order to ensure the validity of the results for the Games of: 2000 (Pandora, Medaltally, CNN sports), 2004 (Yahoo sports, Telegraph), 2008 (Telegraph, BBC) and 2012 (London 2012 official website).

3. VIX futures started to trade on 26 March 2004. In order to extend this series so that it covers complete sample of four Olympic Games, we used VIX spot data for the period between 15 September 2000 and 2 October 2000 as a proxy of the futures series.

Additional information

Notes on contributors

Jessica Y. Wang

Jessica Y. Wang is a Lecturer in Accounting and Finance at Nottingham Business School, Nottingham Trent University.

Raphael N. Markellos

Raphael N. Markellos is Professor in Finance and Director of Research at Norwich Business School, University of East Anglia.