In another 2 days' time, the world's most eagerly awaited event would take centrestage. This event is the World Cup, which happens once every 4 years. A lot of people would stay up late in the night to watch their favourite teams in action. Everything else would take backstage, including wives, girlfriends, and for some, stock trading. How does the local stock market perform during the World Cup? Here, I compare the performance of the Straits Times Index (STI) during the years when World Cup is staged and during other years.
The World Cup usually starts in mid-Jun and ends in mid-Jul. The group stage, which has the most no. of matches and thus the most no. of fans watching, ends around end-Jun. After which, as more and more countries drop out of the World Cup, there will be less and less matches, which are also spaced more widely apart. Thus, the performance of STI in Jun reflects the height of the World Cup fever while the performance in Jul reflects the progressive end of World Cup. Below are the statistics for the performance of STI in Jun, Jul, for the year without Jun & Jul, and for the whole year including Jun & Jul. Statistics in bold reflect the years when the World Cup is staged.
| Year | Jun | Jul | NoJunJul | Year |
| 1988 | 9.4% | 4.6% | 0.1% | 1.2% |
| 1989 | 2.2% | 4.9% | 3.0% | 3.1% |
| 1990 | -1.7% | 1.8% | -2.1% | -1.8% |
| 1991 | -4.1% | -0.5% | 3.1% | 2.2% |
| 1992 | -2.9% | -2.0% | 0.9% | 0.3% |
| 1993 | -4.8% | 0.3% | 5.3% | 4.1% |
| 1994 | -2.5% | -0.8% | -0.3% | -0.5% |
| 1995 | -3.9% | 3.0% | 0.3% | 0.2% |
| 1996 | -1.6% | -8.0% | 0.8% | -0.1% |
| 1997 | -3.8% | -1.1% | -2.9% | -2.8% |
| 1998 | -15.0% | -0.2% | 2.1% | 0.5% |
| 1999 | 13.9% | -1.0% | 5.0% | 5.2% |
| 2000 | 13.5% | 0.6% | -3.6% | -1.8% |
| 2001 | 4.2% | -3.5% | -1.4% | -1.1% |
| 2002 | -7.1% | -2.9% | -0.7% | -1.4% |
| 2003 | 7.3% | 7.7% | 1.3% | 2.4% |
| 2004 | 2.8% | 2.9% | 1.0% | 1.3% |
| 2005 | 2.4% | 6.3% | 0.5% | 1.1% |
| 2006 | 2.2% | 0.4% | 2.3% | 2.1% |
| 2007 | 1.1% | 0.0% | 1.6% | 1.4% |
| 2008 | -7.7% | -0.6% | -5.3% | -5.1% |
| 2009 | 0.2% | 14.0% | 4.0% | 4.5% |
| 2010 | 3.0% | 5.4% | 0.2% | 0.9% |
| 2011 | -1.2% | 2.2% | -1.8% | -1.4% |
| 2012 | 3.8% | 5.5% | 1.0% | 1.6% |
| 2013 | -4.9% | 2.3% | 0.3% | 0.0% |
| Average (WC) | -3.5% | 0.6% | 0.2% | 0.0% |
| Median (WC) | -2.1% | 0.1% | 0.0% | 0.0% |
| Average (Others) | 1.3% | 1.9% | 0.7% | 0.8% |
| Median (Others) | 0.6% | 1.4% | 0.9% | 1.2% |
On average, in the years when there is World Cup, the performance of STI during Jun is -3.5%. This is lower than the performance in other years when there is no World Cup (1.3%). It is also lower than the average performance for the whole year (0.0%) and reflects the fact that people stay away from the stock market to watch football. In Jul, as people return to their normal activities, the STI stages a recovery of 0.6%, which is also higher than the average performance for the whole year.
Thus, based on the above statistics, it may be advantageous to stay away from the stock market when the World Cup is in action and re-enters the stock market when the World Cup is about to end.
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But isnt counters usually driven by institutional firms more than retail investor? Any particular reason you might know why it couls be the case?
ReplyDeleteInstitutional firms are also managed by people, who are also influenced by the World Cup ;)
DeleteThanks for sharing the stats, basing on the last 2 world cups (2006 and 2010), it is a positive trends in the month of Jun/Jul, hence, I predict that there would be lesser impact of WC 2014 too...
ReplyDeleteDoesn't really matter to me. If it drops, I'll be picking up some bargains. If it rises, I might consider selling.
DeleteThere maybe lower trade but not sure about lower STI which can be just coincidence as the data period is quite limited. Maybe a good time to catch divergence !
ReplyDeleteYes, it could be due to a combination of factors, not just the World Cup. A good time to catch bargains if it really drops!
Delete