Information salience, investor sentiment, and stock returns: The case of British soccer betting

Frederic Palomino, Luc Renneboog and Chendi Zhang

Journal of Corporate Finance, 2009, vol. 15, issue 3, 368-387

Abstract: Soccer clubs listed on the London Stock Exchange provide a unique way of testing stock price reactions to different types of news. For each firm, two pieces of information are released on a weekly basis: experts' expectations about game outcomes through the betting odds, and the game outcomes themselves. The stock market reacts strongly to news about game results, generating significant abnormal returns and trading volumes. We find evidence that the abnormal returns for the winning teams do not reflect rational expectations but are high due to overreactions induced by investor sentiment. This is not the case for losing teams. There is no market reaction to the release of new betting information although these betting odds are excellent predictors of the game outcomes. The discrepancy between the strong market reaction to game results and the lack of reaction to betting odds may not only be the result from overreaction to game results but also from the lack of informational content or information salience of the betting information. Therefore, we also examine whether betting information can be used to predict short-run stock returns subsequent to the games. We reach mixed results: we conclude that investors ignore some non-salient public information such as betting odds, and betting information predicts a stock price overreaction to game results which is influenced by investors' mood (especially when the teams are strongly expected to win).

Keywords: Investor; mood; Media; attention; Sports; betting; Football; Market; efficiency (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (75)

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Working Paper: Information Salience, Investor Sentiment, and Stock Returns: The Case of British Soccer Betting (2008)
Working Paper: Information Salience, Investor Sentiment, and Stock Returns: The Case of British Soccer Betting (2008)
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