The Game After the Whistle: The Effect of Soccer Matches on Bond Price
When your national football team scores a decisive win in a major tournament, the celebrations create a wave of national pride and unity. But what if the stakes were even higher?
Is winning a national football match in prominent tournaments important for the national economy? In this research, we study how important football match outcomes affect 10-year government bond yields. To answer this question, we evaluate the causal impact of national football match (World Cup and European Championship) outcomes (win, loss and tie) on 10- year government bond yields in event study setting for 475 World Cup and 337 European Championship matches from 1990 to 2021. We find that, despite the immediate negative reaction following a loss, the effect flips from the first trading day to the second trading day after the match. This suggests a preliminary negative reaction to the national loss on the first trading day after the match and a quick rebound on the second trading day after the match. We show that this surprising flip from day 1 to day 2 following the lost matches can be partially explained by the positive manipulation of the sentiment of the economic news released by the governments. Together these results show the significance of football matches for the economy and the subsequent strategic intervention of governments to alleviate the financial aftermath of a national loss.