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Type Master's Thesis
Scope Discipline-based scholarship
Title Testing stock market efficiency - An empirical study for European football stocks
Organization Unit
Authors
  • Frederic Rupp
Supervisors
  • Quan Zhang
  • Felix Kübler
Language
  • English
Institution University of Zurich
Faculty Faculty of Economics, Business Administration and Information Technology
Number of Pages 76
Date 2014
Abstract Text This study uses the price reaction after matches of the stocks of ten European football clubs to test stock market efficiency. This approach has several advantages over other studies using e.g. income data or mergers and acquisition announcements as matches are played more often and on a regular basis, betting odds can be used to control for the expectations and insider trading is a problem that can be neglected. The results show that the main explanatory factor for football stock returns after matches is the number of unexpected points. This leads to significant price reactions also after expected outcomes because some points are always unexpected. The analysis also shows significantly positive stock price reactions when the team won more points than expected and significantly negative stock price movements when it won fewer points than expected. The magnitudes of the returns also show that the bigger the difference between the expectation and the realiza-tion, the bigger the impact on the stock price. But the differences are only significant after wins. The study fails to show that the impact of European Competition matches is bigger than that of National League matches. The regression models show that match-outcomes on average explain 8.4% of the returns on trading days following a match, combined with a country-index and the STOXX Europe Football index on average another 7.5%, meaning 15.9% of the returns on trading days fol-lowing a match are explained. Extending the model to all trading-days and adding some lagged variables it can explain on average 8.0% of all the returns of a team. Further research shows that the constellation in the table and the results of direct opponents, especially when competing for the qualification for the European Competitions, have a great impact on the stock prices whereas the influence of transfers is limited.
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