Trading on the World Cup
There may be a way to trade in stock markets based upon World Cup results. Generally, Goldman Sachs has found the winning nation outperforms global stock markets in the weeks after winning the World Cup. Meanwhile, runner-up the nation generally underperforms global indices in the weeks after a loss at the World Cup final.
Unfortunately for World Cup victors, outperformance usually tails off, Goldman said.
"Looking at history, there is a clear pattern of outperformance by the winning team in the weeks after the World Cup final. On average, the victor outperforms the global market by 3.5% in the first month - a meaningful amount, although the outperformance fades significantly after three months," Goldman noted.
In fact, all the winners of the World Cup since 1974 outperformed global markets in the post-final month, with the exception of Brazil in 2002, a World Cup win that came amid a currency and balance of payments crisis in the country.
"But sentiment can only take you so far," Goldman notes. The winning nation doesn't tend to hold on to its gains and, on average, sees its stock market underperform by around 4% on average over the year following the final.
"The message seems to be: enjoy the gains while they last...," Goldman concluded.
Seven of the last nine World Cup runners-up underperformed over the first month with an average underperformance of 1.4% and that the poor performance continued. Most of the World Cup runners-up have seen their stock markets continue to underperform, with an average relative fall of 5.6% over the first three months.
The Economics of Football
Economies and World Cup squads on the rise in 2014 include Colombia, Cote d'Ivoire, England, Germany, Italy, Korea, Mexico, Uruguay and the United States, economists in Goldman's global investment research division said in the 67-page report.
Countries such as Brazil, Russia, Portugal, the Netherlands, Japan, France, Chile and Argentina face the prospect of worsening footballing and economic results this World Cup.
The World Cup kicks off on Thursday, June 12, when host-nation Brazil takes on Croatia in Sao Paulo.
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-- Written by Antoine Gara in New York.