How the FIFA World Cup Affects the Markets and Ways To Use It In Your Marketing
August 9, 2023
By Acuity Trading
If you thought the FIFA Women’s World Cup plays second fiddle to the men’s football tournament, here are some staggering numbers you need to know. As of August 4, 2023, more than 1,715,000 tickets have been sold for the Women’s World Cup in Australia and New Zealand. The women’s sport has been gaining popularity for some time now, surpassing all expectations in 2023.
Why does this matter to brokers? Historical market data shows that the outcomes of football matches can have a significant impact on the financial markets, especially the stock market. The impact continues for some time after the final match and the crowning of the winner. Here’s what you need to know to support your traders and drive trading activity through globally popular sporting events.
Historical Instances of FIFA Defining the Market Direction
Behavioural trading researchers have studied the FIFA and other sporting events to gauge their impact on the financial markets.
The Winner Effect
A study by Goldman Sachs on the FIFA World Cups before 2014 showed that the stock market of the winning country could outperform the global markets by around 3.5% on average in the month following the win. This is also called the “Winner Effect.” The only exception was the Brazilian win in 2002, when the country was plagued with recession.
Impact of Losing is 2x to 3x Stronger than the Joy of Winning
The stock markets of runner-ups demonstrate deeper effects than those of winners. Losing nations experience “post-final bout of the blues” and could underperform by up to 5.6% over the following 3 months. However, this too has exceptions. Argentina, for instance, outperformed by 33% in 1990, when it lost the finals against Germany. The reason was many FIFA firsts being recorded during the final match, including the first rematch of a final and the first back-to-back rematch.
Another study found that losses have a more significant impact on investor mood and hence, trading activity, compared to wins. Presumably, traders take the loss of their favourite teams personally and prefer taking safer positions to prevent suffering from financial losses too. The research revealed that a similar effect was evident after losses in cricket, rugby and basketball. The loss effect is stronger in sports-crazy nations and among small-cap stocks. The research was so widely accepted that it won a spot in the Investors Chronicle.
Inattention Drives the Markets
The financial markets are not just affected by the result of matches. Even during the 90 minutes of a major match, the markets of the two competing nations experience significant match-related volatility. Firstly, “inattention” erodes trader engagement and results in reduced activity. Loss of trading volumes leads to heightened volatility. The markets return to normal after 60 to 90 minutes of the match ending. Equity trading volumes in the US declined 43% when the US was playing in the 2010 World Cup. The research also found that a goal reduces trading activity by 10% and it takes some time for the euphoria or disappointment to subside.
What Should Brokerages Do?
Since traders are increasingly integrating World Cup predictions into their trading strategies, market movements are affected by speculations regarding the result of a match. Make sure you facilitate access to adequate information and insights to assist your traders in making quick trading decisions at this time.
A critical aspect of behavioural trading during FIFA is to account for the market sentiment. Also, traders may not be aware of the assets directly driven by FIFA, such as the stocks of sports gear or sponsoring companies. This is the reason Crypto.com decided to leverage FIFA’s popularity to gain traction for cryptocurrencies in 2022. Further, the announcement of the destination of the World Cup, helps boost the hosting country’s tourism sector, GDP and job opportunities, pushing the economy higher and creating more trading opportunities.
You can establish analytical dominance across communication channels by using media chatter and other information to help traders speculate on market moves. Brokers can also take a hint from Investors Chronicle and highlight relevant assets to trade that align with the trader’s strategies to boost activity on their platform.
Delivering actionable insights directly to traders prevents them from missing out on opportunities due to their focus on the match. Further, backing actionable insights with data ensures informed decision-making and eliminates the fear of emotional trading, thereby enhancing their experience and trading volumes.
Acuity’s AssetIQ is a comprehensive tool that uses news, calendar, price and sentiment data to calculate opportunity scores. Their NLP-powered Sentiment Analysis turns infobesity to the trader’s advantage to identify patterns and trends using granular opinions, analysis of disparate data sets, and real-time news updates. It also facilitates your brokerage to deliver automated trading insights straight into traders’ inboxes.