Examining intraday stock price changes of a company cross-listed on both the Paris and Milan stock exchanges, the authors consider how the elimination of both France and Italy’s teams during the 2010 Fédération Internationale de Football Association (FIFA) World Cup negatively affected the share price. They evaluate stock price behavior both during the match and after its conclusion.

Sentiment can influence financial markets. Prior literature has considered how such factors as seasonal affective disorder, the quantity of morning sunshine, and daylight saving time can influence an investor’s mood. The effect of major sporting event outcomes on stock prices has also been considered, and the results are more pronounced for defeats than for victories.

The authors show how the elimination of France and Italy’s teams during the 2010 World Cup altered the mood of investors and quickly depressed stock prices in real time during the matches as both teams approached defeat. They examine high-frequency intraday trading data and consider a cross-listed company that trades on both French and Italian stock exchanges, making the identification of pricing anomalies easier because both exchanges price in euros. Finally, the authors evaluate the trajectory of stock prices during two high-profile matches in which France and Italy’s teams competed in the final round of the group stage in the 2010 World Cup.

Sporting events can alter investor moods and have an almost immediate effect on stock prices. Stock prices in the market of the country whose team is losing can be significantly lower than prices in the market of the country whose team is winning. The authors observe that the likelihood of underpricing increased as the game progressed and the team’s defeat appeared more likely. In the case of France, which lost to South Africa, the negative sentiment on the Paris stock exchange lingered a bit after the conclusion of the match. The authors control for soccer-related mood effects and investor inattention to ensure that exogenous factors do not cloud the outcome of their hypothesis.

The authors’ research explores an interesting niche of behavioral finance that could be of interest to students of the topic as well as traders, market strategists, analysts, and portfolio managers.

The authors examine mood-related stock price changes of STMicroelectronics (STM), one of the world’s largest semiconductor companies, which is cross-listed on both the Paris and Milan stock exchanges, during two matches at the 2010 FIFA World Cup. These were the last matches in the group stage. France competed against South Africa on 22 June 2010, and Italy played Slovakia on 24 June 2010.

The authors observe minute-by-minute stock price data from 3 May 2010 to 30 July 2010. Both the Paris and Milan stock exchanges are sufficiently deep and liquid markets, and the fact that the company was cross-listed on both exchanges during the 2010 World Cup allowed for easy identification of any pricing anomalies between the two markets. Because both exchanges trade in the same currency, the authors did not need to control for exchange rate fluctuations. Price deviations between Paris and Milan should not exist because they would create arbitrage opportunities. Positive values would represent overpricing and negative values underpricing on both exchanges. They examine possible price differences during the period of the World Cup from 11 June 2010 to 11 July 2010 along with a benchmark sample six weeks before and three weeks after and find only a small number of outliers.

To study the effects of investor mood on stock prices, the authors use detailed graphs. Time plots illustrate price deviations as the matches progress. Histograms allow the authors to examine the distribution of pricing deviations during the games. They also use probit regressions to quantify the possibility that investors’ moods can affect stock prices. As the games advance, the authors observe price declines on both exchanges for STM, although the declines are of differing magnitude. Their observation supports the hypothesis that a mood effect causes stock price declines when the respective country’s team is losing during a game.

The authors had a unique set of circumstances in the form of two matches that occurred at the 2010 FIFA World Cup during trading hours and a cross-listed company on the deep and liquid stock exchanges of two countries that use the same currency. As the likelihood of elimination increased for both France and Italy, the price of the jointly listed company declined on their respective exchanges, although by differing orders of magnitude.

It would be interesting to extend the authors’ model to a larger sample of cross-listed firms over a longer period of matches. Finally, researching how mood affects price changes by observing the more granular tick-by-tick rather than minute-by-minute changes may provide greater precision in observing the effect of investors’ moods on stock prices during sporting events and test further the bounds of market efficiency.