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Sports sentiment and behavior of stock prices: a case of T-20 and IPL cricket matches

Gourishankar S. Hiremath (Department of Humanities and Social Sciences, Indian Institute of Technology Kharagpur, Kharagpur, India)
Hari Venkatesh (Department of Humanities and Social Sciences, Indian Institute of Technology Kharagpur, Kharagpur, India)
Manish Choudhury (HDFC Ltd, Mumbai, India)

Review of Behavioral Finance

ISSN: 1940-5979

Article publication date: 12 August 2019

Abstract

Purpose

The purpose of this paper is to examine whether the emotions and sentiments related to the outcome of the sporting event influence the investment making process.

Design/methodology/approach

This study uses the data on stock prices of firms sponsoring the Indian premier league (IPL) teams and data on Indian stock market. The event-study frameworks along with autoregressive moving average and GMM regression are employed to empirical quantify the impacts of the performance of the IPL teams on the stock market returns of the sponsors’ stocks and response of Indian stock market to the outcome of T-20 international matches.

Findings

The paper finds that the team winning IPL title in a season has a positive impact on the returns of the sponsors’ stocks of a particular team, whereas loss of team has a negative impact on returns. The outcome of the cricket matches played by team India in the T-20 has a negligible effect on the Indian stock market.

Practical implications

The finding of the study implies the coexistence of emotions and rationality at different points in time and the relevance of adaptive market hypothesis to explain such time-varying behavior.

Originality/value

The present investigation is first of its kind to test whether the performance of the IPL cricket team can influence the stock returns of the sponsors. This research shows that sentiment related to sports event such as cricket influences the decision-making process and thus affects underlying stock prices.

Keywords

Acknowledgements

The authors thank Editor Robert Hudson and the anonymous referee for their comments and suggestion on the earlier version of the paper. A part of earlier version of the paper was submitted as MTech thesis to the IIT Kharagpur by the author.

Citation

Hiremath, G.S., Venkatesh, H. and Choudhury, M. (2019), "Sports sentiment and behavior of stock prices: a case of T-20 and IPL cricket matches", Review of Behavioral Finance, Vol. 11 No. 3, pp. 266-276. https://doi.org/10.1108/RBF-04-2018-0043

Publisher

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Emerald Publishing Limited

Copyright © 2019, Emerald Publishing Limited