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Who is interested in football clubs’ stocks: rational investors or fans?

Who is interested in football clubs’ stocks: rational investors or fans?. Authors: Aleksei S. Chmykhov National Research University Higher School of Economics Petr A. Parshakov National Research University Higher School of Economics. Perm 20.02.2017. Introduction.

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Who is interested in football clubs’ stocks: rational investors or fans?

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  1. Who is interested in football clubs’ stocks: rational investors or fans? Authors: Aleksei S. Chmykhov National Research University Higher School of Economics Petr A. Parshakov National Research University Higher School of Economics Perm 20.02.2017

  2. Introduction • Football clubs need money to develop Wealthier clubs are better performers (Szymansky, 2007) • Main sources of revenue: TV rights, gate sales, sponsorship But still there is a need for additional financing (Andreff, Szymansky, 2007) • The attention of football clubs turned to stock exchange Stocks emission gives an opportunity to attract additional money and improve financial position (Cooper and McHattie, 1997) • How does the sporting performance later influence club’s stock prices? High sporting results may transfer in additional financial rewards (Dobson, Goddard, 2001) • Who buys football clubs’ shares? Fans may buy shares to “own the piece of the team” [Brown, Hartzell, 2001 p. 337] photo photo photo

  3. Research Organization photo photo photo

  4. Literature on the sporting results impact photo photo photo

  5. Literature on the sporting results impact photo photo photo HigherSchoolofEconomics , Moscow, 2013

  6. Literature on the sporting results impact photo photo photo HigherSchoolofEconomics , Moscow, 2013

  7. Data • 10 publicly owned European football clubs • 2012-2016 seasons • Local competitions games results and features • Pre-games betting odds from bet365 • Daily returns of football clubs stocks and MSCI World Index Sources: www.football-data.co.uk (game results and betting odds) Bloomberg database (stock prices and market returns) photo photo photo

  8. Chosen clubs photo photo photo

  9. Match results 2012-2016 photo photo photo

  10. Event study (1st step) Abnormal returns estimation Where: - an actual stock return of a club i -a normal return of a club i stock for time period t -conditioning Information for the normal return mode Market model: Where - market portfolio return: MSCI World Index (MXWO) photo photo photo

  11. Event study (2nd step) Estimating factors of AR photo Where: Match_resultis a match result dummy variable. Equal: 2 – win, 1 – draw, 0 – loss Season_partis a half of the season dummy variable. Equal: 0 – 1st half, 1 – 2nd half Match_qualityis a set of variables reflecting match specularity Expectations is set of variables to control for match expectations photo photo

  12. Expectations variables Firstly, we calculate a winning probability which is equal to 1/Winning betting odd (Zuber et al. 2005) Secondly we create six dummy variables: 1) Expected Win but Loss (EWL) 2) Expected Win but Draw (EWD) 3) Expected Draw but Win (EDW) 4) Expected Draw but Loss (EDL) 5) Expected Loss but Win (ELW) 6) Expected Loss but Draw (ELD) photo photo photo

  13. Results (1st step) photo Note: * - significant at 0,1 level, ** - at 0,05 level, *** - at 0,01 level photo photo

  14. Results (2nd step) photo photo photo Note: * - significant at 0,1 level, ** - at 0,05 level, *** - at 0,01 level

  15. Conclusions Football investors seem to be rational: • Positive reaction to wins • Negative reaction to draws and losses • Positive reaction if a team beats expectations • No reaction to the spectacularity of the match • No part of the season effect photo photo photo

  16. Further research • Check the effect before, during and after the crisis • Add friendly matches and international games • Add other events: transfer news, coach changes etc • Expectations as an odd for individual goals spread of a team • National games + expectations to extend Floros (2014) photo photo photo

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