Motivated by psychology research showing that individual mood is affected by weather and daylight savings changes respectively, Saunders (AER, 1993) and Kamstra et al (AER, 2000) find that stock prices are systematically related to these economically-neutral events. These results provide a significant challenge to conventional finance theory insofar as they imply that investor behaviour, and consequently market prices, respond to factors and events other than those indicated by economic fundamentals. Nevertheless, in the absence of more widespread evidence, it seems prudent to remain sceptical about this conclusion. We attempt to generate further evidence by appealing to another large psychology literature that documents a strong relationship between sporting team success and fan self-esteem. As there is no reason to believe that sports results have any effect on rational cashflow forecasts or discount rates, market prices should be impervious to such events, but if sporting event outcomes influence investor self-esteem, then they may also affect stock prices. We examine this hypothesis in the context of the New Zealand national rugby team and the New Zealand stockmarket since this provides us with a situation where the majority of investors are likely to support the same team and thus any psychological effect on prices should lead in a single direction. However, we find no evidence of any relationship between national sports team success and New Zealand stockmarket return behaviour, regardless of the time period analysed, the frequency of the data used, or the classification of sporting success and failure. Thus, irrational investor responses to sporting contest results are transitory at best.
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