How relative competitive strength moderates stock price responses after European soccer tournaments

Abstract

Stock price responses of soccer clubs to national and international tournaments have been interpreted in light of fan investors who are prone to emotions. We employ Champions League and Europa League fixtures between 2004 and 2020 to investigate whether postmatch stock price responses are driven by emotions. We argue that a soccer club’s relative competitive strength can be a proxy for investors’ emotions, such as rage and disappointment, after losing against a strong opponent, which then leads to abnormal decreases in stock prices. While we find several factors, such as the percentage of shares held by institutional investors less subject to emotions, whose effects on postmatch abnormal returns are in line with rational information processing, our evidence also suggests that the effect of a club’s relative competitive strength on stock performance is driven by investor emotion.