Predictive elements of the stock market in the foothball industry.

Abstract

In our study, we seek to establish a relationship between football clubs’ match results and their respective stock market performance. With the increasing commercialism of the football industry, more investors have been exploring opportunities to invest in this industry.

Our study aims to explore the potential relationship between the football clubs’ match performances and their stock returns. We identified six European football clubs, over the period from 2007 to 2012, for our analysis. The six clubs are as follows; Ajax (Holland), Besiktas (Turkey), Dortmund (Germany), Fenerbahce (Turkey), Juventus (Italy) and Lazio (Italy).

At the 5% significant level, we concluded that there is significant evidence of a direct relationship between the two variables - match results and stock returns of football clubs. Additionally, we categorized our data into different competitions namely; domestic league, domestic cups and international competitions. In our findings, we identified that results from the domestic league have the strongest influence on stock returns as its beta is approximately five times more than the other two independent variables. Finally, with an adjusted R-square of 14%, there is an existence of a regression model to forecast the stock returns after knowing the match results. Therefore, investors may use this model to forecast the movement of these football clubs’ stock prices.