Summary of Key Points
The so-called “World Cup Curse” is not an absolutely reliable pattern: Early mature markets (such as the United States and Europe) did experience declines during World Cups, but this effect has gradually weakened in recent years. The performance of the A-share market in China is more influenced by its own economic cycle, policies, and seasonal factors, showing only a superficial correlation with the World Cup. The underlying mechanisms include investors becoming distracted, leading to reduced trading volume; negative emotions following team losses; and the self-fulfilling prophecy created by the spread of narrative.
Detailed Analysis
1. The World Cup Curse: True in the Past, Why Not Now?
Early studies did confirm a decline in stock markets during World Cups. A 2010 paper analyzed 15 World Cups from 1950 to 2007 and found that the U.S. stock market fell by an average of 2.58% on match days, compared to a 1.21% increase on regular days. Europe, with its strong football culture and similar time zones, responded even more strongly—during the 1998 World Cup in France, the UK’s FTSE 100 index fell by up to 6.6%, and the Paris CAC40 index lost 30% after the tournament.
However, things have changed in recent years. Out of three World Cups from 2014 to 2022, stock markets around the world actually rose in two cases. This is because markets have become more sophisticated; investors are aware of the “World Cup Curse” and can prepare in advance (for example, by selling before buying), which counteracts its effect. Additionally, with improved market efficiency, the impact of the World Cup on stock markets has naturally diminished.
2. The A-share Market’s Performance During the World Cup: Little to Do with the World Cup, More Due to Internal Issues
The most concerning question for A-share investors is whether the market declines significantly during the World Cup. Over eight World Cups (1994–2022), the Shanghai Composite Index showed a 50% decline and a 30% increase, resulting in a 62.5% chance of decline. However, the fluctuations were extreme—there were instances of gains of 13.73%, as well as losses of 18.25%.
These fluctuations are not related to the World Cup:
- Reasons for declines: They were due to internal market issues, such as a lack of price limits in 1994 or global risk aversion triggered by the European debt crisis in 2010, and China-U.S. trade tensions in 2018.
- Reasons for gains: Policy initiatives that stimulated the economy sometimes led to market gains during World Cups.
- Superficial Correlation: The World Cup usually takes place in June or July, which coincides with the worst month of performance for the A-share market in the past 20 years (commonly referred to as “June’s Disaster”), but this is just a coincidence and not the result of the World Cup.
3. Reduced Trading Volume: Everyone Watches the Matches, So Few Trade
The most consistent phenomenon during the World Cup is not a decline in stock prices but a decrease in trading volume. Research by the European Central Bank found that:
- When a national team is competing, trading volume drops by 35.8%, and the number of trades decreases by 38%. Even when a goal is scored, trading volume further falls by 10.6%—everyone is focused on the screen, cheering or sighing, leaving no one to trade stocks.
- Even if a country is not competing, trading volume still averages a 14.1% decrease. The World Cup’s popularity draws investors’ attention away from trading.
4. Emotional Impact: Losing Matches Harms the Stock Market More Than Winning Ones
The outcome of football matches affects investor sentiment. Studies show that on days when a national team loses in the knockout stages, stock markets fall by an average of 0.49% the following day. This is due to “loss aversion”—people react more strongly to losses than to gains. Losing games leads to negative emotions, prompting investors to sell stocks; the joy of winning does not motivate them to buy heavily.
5. Narrative Economics: The More People Believe in the Curse, the More Likely It Is to Come True
Even if the “World Cup Curse” is not scientifically based, it can become a reality if many people believe in it. This is according to Nobel Prize-winning economist Robert Shiller’s theory of “narrative economics.”
- When the idea that “stock markets always decline during World Cups” spreads like a virus, investors develop a cognitive bias, expecting a drop and collectively reduce their holdings.
- As more people sell stocks, market prices fall, fulfilling the self-fulfilling prophecy. In other words, the curse may exist because so many people believe in it.
Conclusion
The impact of the World Cup on stock markets is mainly due to a shift in attention and emotional fluctuations, rather than a direct causal relationship. Instead of worrying about the curse, it’s better to focus on economic fundamentals: stock prices are influenced by money flow, policies, and corporate profits, not football. Should you sell your stocks this week? Don’t let the World Cup distract you—just make decisions based on market conditions.
(P.S.: The final sentence, “Should I sell? Or should I sell?” is a joke; don’t take it seriously!)