Tuesday, May 23, 2006

Soccernomics

This weekend a depleted Bafana Bafana football squad lost in the Cosafa Cup to lowly Botswana. Now I would be loath to link the current run on the JSE to this loss, as there are a multitude of world market influences at play, one can’t help bit wondering if this slow chipping at away at our national confidence is starting to have an effect
Two interesting analyses on the upcoming World Cup come via
Paul Kedrosky .

There is a fascinating
research paper upcoming that looks at the effect of World Cup soccer wins and losses on country stock market indices. In short, the authors document a strong negative stock market reaction to losses by national soccer teams, on the order of 7%. (There is no corresponding effect for soccer wins.) The authors also find a significant but smaller effect for international cricket, rugby, and basketball.

And this extract from mainstream “Soccernomics”analysis from ABN Amro.
Although the direct economic impact (higher sales in bars and cafes) is marginal, good performances on the pitch can certainly stimulate an economy. In the past, countries winning the World Cup added around 0.7% to their economic growth. And at the last three tournaments the winning country's stock market considerably outperformed the losing finalist's market. On average there was 10% positive effect in the winner and a 25% negative effect in the loser.

The ABN Amro reports can be found
here & here.

I am almost certain that the 2nd Quarter
BER Business Confidence index will indicate a decline in economic confidence.
And by the end of the 3rd Quarter and when interest rates have kicked up 3% and we’ve lost the Tri-Nations rugby to New Zealand who knows where confidence will be.

Who says sport doesn’t count?

6 comments:

Third World Ant said...

Hey ATW - I've battled to access your comments page for the last few days, my Internet's broken! It is with glee that I read that Italy is the economic favourite to win the World Cup - have the blood coursing through my veins after all - though I'm still not going to bet any money on their win!

ATW said...

It's only once every 4 years that I support football with any seriousness. This is going to be a goody, I've no doubt.

I'll have to send a note to GIS instructing them to revoke your membership , not being patriotioc enough to put your money where your mouth is!)

Third World Ant said...

My aren't we cocky today? Rubbing my face in your anonymity? Google isn't the only way... remember that.

I'm 'patriotic' enough (considering I was born and bred in jozi - but you probably already knew that, didn't you?) to scream bloody murder for 'my' side, wear de rigeur green, white and red, and cry (lots) when they lose. I'm just not foolish enough to lose any money on it :)

ps: one word. WAR!

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