Admit it: you keep an eye on the World Cup while at work. So do stock traders, apparently.
Bloomberg Businessweek relays the results of a paper by researchers at the European Central Bank, showing that stock market trading volume plunged, at least in some countries, during matches of the 2010 World Cup.
Here's the abstract of the paper, by Michael Ehrmann and David Jan-Jansen (the chart above is from Table 3b, page 28):
At the 2010 FIFA World Cup in South Africa, many soccer matches were played during stock market trading hours, providing us with a natural experiment to analyze fluctuations in investor attention. Using minute‐by‐minute trading data for fifteen international stock exchanges, we present three key findings. First, when the national team was playing, the number of trades dropped by 45%, while volumes were 55% lower. Second, market activity was influenced by match events. For instance, a goal caused an additional drop in trading activity by 5%. The magnitude of this reduction resembles what is observed during lunchtime, and as such might not be indicative for shifts in attention. However, our third finding is that the comovement between national and global stock market returns decreased by over 20% during World Cup matches, whereas no comparable decoupling can be found during lunchtime. We conclude that stock markets were following developments on the soccer pitch rather than in the trading pit, leading to a changed price formation process.
Aside from these findings, I found something else noteworthy. On pages 18-19, Ehrmann and Jan-Jansen report that the standard deviation of minute-by-minute stock returns across individual stocks declined significantly during matches. They interpret this result as that limited attention makes traders process less firm-specific information, relative to market- and sector-wide information.
If you don't believe in market efficiency, World Cup games might be a good time to trade.
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