World Cup: High stakes, low volumes!

by: , Director and Portfolio Manager, New York Life Investment Management

The group stage is complete. Next up, elimination rounds.

An event of this size is bound to have an impact

The World Cup is among the biggest sporting events in the world. At 3.2 billion viewers, in 2014, the World Cup captured the attention of about half the earth’s population, rivaling the 3.6 billion viewers for 2016 Olympics. Naturally, a sporting event of this scale is bound to have some impact on the world economies and the financial markets.

Trading volumes

An ECB study from 2012 “The Pitch Rather Than the Pit”1 found some interesting trading patterns in the global stock markets during the times when the soccer matches were played. Based on minute-by-minute trading data for 15 international stock exchanges, they came up with three key findings:

  1. When the national team was playing, the number of trades dropped by 45%, and volumes by 55%
  2. Market activity was influenced by match events. For example, a goal caused an additional drop of 5% in trading activity, which is similar in magnitude to the reduction during lunchtimes
  3. The co-movement between national and global stock market returns decreased by over 20% during the World Cup matches, whereas no comparable decoupling can be found during lunchtime, implying the stock markets were following developments on the soccer pitch rather than in the trading pit

The table below shows the percentage change in trading volumes during World Cup matches. It is interesting to note that, at -43%, the drop in trading activity in North America when the national team was playing, was higher than that of the European nations, which was -38%. The traders in Latin America, with a drop of -77% in trading activity, seem to be the most passionate!

Volume per min, outside World Cup % change in volume during other nations’ matches % change in volume during own matches
All 267,693 -33.1% -55.2%
Argentina 16,389 -68.6% -79.8%
Brazil 562,462 -28.5% -74.5%
Chile 321,560 -79.0% -99.5%
Denmark 8,098 -31.0% 6.1%
England 2,303,583 -32.0% -26.5%
France 453,307 -26.7% -37.7%
Germany 159,641 -37.0% -59.5%
Italy 3,016,058 -13.9% -19.4%
Mexico 410,283 -24.4% -63.3%
Netherlands 215,749 -32.4% -33.8%
Portugal 122,888 -47.3% -57.0%
South Africa 15,789 -14.1% -62.9%
Spain 594,593 -28.9% -30.7%
Switzerland 129,836 -37.5% -40.0%
United States 488,720 -23.5% -42.8%
North America 488,720 -23.5% -42.8%
Latin America 417,159 -43.2% -77.4%
Europe 163,045 -31.6% -37.7%
Africa 15,789 -14.1% -62.9%

Source: ECB, as of 2/12.

While these short-term effects are interesting to watch, we believe that the impact for long term investors is negligible. The long-term investors do not need to alter how and when they invest, and can continue to support their favorite team!

1. https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1424.pdf?9414815e777ee82847c9f2e174687710

Opinions expressed are current opinions as of the date appearing in this material only. The information and opinions contained herein are for general information use only. New York Life Investments does not guarantee their accuracy or completeness, nor does New York Life Investments assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Such information and opinions are subject to change without notice, and are not intended as an offer or solicitation with respect to the purchase or sales of any security or as personalized investment advice. There can be no guarantee that any projection, forecast, or opinion in these materials will be realized. Past performance is no guarantee of future results.

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Amit Soni, CFA

Director and Portfolio Manager, New York Life Investment Management

Amit Soni is a Director and Portfolio Manager in the Strategic Asset Allocation & Solutions (SAS) team at New York Life Investment Management. He focuses on quantitative and macro-economic investment research and portfolio management for the asset allocation

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