This paper investigates whether or not the share prices of soccer clubs listed on the London Stock Exchange and the Alternative Investment Market are influenced by the soccer teams' weekly sporty performances. Event studies corrected for thin trading and with Baysian updating reveal that at the first day of trading after a game, positive abnormal returns almost 1% were realised expected following a soccer victory. In contrast, defeats or draws are penalised, respectively, by negative abnormal returns of 1.4% and 0.6%. Cumulatively over the week, defeats and draws trigger abnormal losses of 2.5% and 1.7%. These findings are consistent across the English and Scottish, national Cup and European competitions. Much larger abnormal returns are generated subsequent to promotion and relegation games as the Premier League and European games guarantee substantially higher (future) income in terms of television broadcasting rights and sponsoring income. Whereas victories seem to be more rewarded by share price increases for those clubs listed on the LSE in comparison to those listed on the AIM, defeats lead to larger price reductions for AIM listed clubs. In spite of the sporty performance sensitivity of listed soccer clubs and the excellent share price performance of certain clubs like Manchester United, Sunderland and Celtic, Jensen's alpha and the Sharpe ratio of an equally weighted investment in listed soccer clubs since 1996 points out that such an investment has substantially underperformed the market index.
|Place of Publication||Tilburg|
|Number of pages||30|
|Publication status||Published - 2000|
|Name||CentER Discussion Paper|
- Soccer club valuation
- Event studies
- Share price reactions