De Beer, Carl Francois (2012) Can sport impact rational investor behaviour? An evaluation of the impact of national sporting performance on stock market returns in South Africa. Masters thesis, Rhodes University.
The finance industry is an extremely fast and complex world dominated by the Efficient Markets Hypothesis (EMH). This theory contains many assumptions which include that investors are rational utility maximisers and that market prices reflect all relevant economic information available to the public. However, over the years, a new form of financial literature known as behavioural finance has been gaining momentum. Behavioural finance seeks to bridge the gap between psychology and economics in an attempt to gain a better understanding of how markets react to different situations. Behavioural finance has also gained much attention in recent years due to the EMH’s inability to explain many economic anomalies. This study first considers the differences between behavioural finance theory and EMH theory before explaining how an individual’s mood has the ability to influence one’s risk taking preferences. Mood changes were also found to be linked to changes in the way an individual reacts to different situations, the way they thinks and processes thoughts. Negative events were also found to have a greater influence on an individual’s mood than positive events did, resulting in an asymmetric relationship between positive and negative results. This study then examines numerous studies indicating how non-economic events can have a statistical and significant influence on stock market returns before analysing previous literature where sport was found to influence market prices. The aim of this study is to determine if South African national sporting performance can influence investors in such a way that it has the ability to impact on market returns. Using standard event study methodology, this study determines the constant mean return using the daily All-Share price index on the JSE for the period of 1 January 1990 to 31 December 2010. This study focuses on three of South Africa’s most popular sports, namely soccer, cricket and rugby and examine if these three sports have the ability to influence market returns. Although there is some evidence of a relationship between stock returns and sporting performance in the descriptive analysis, the regression results indicate that sporting performance in South Africa does not significantly explain abnormal market returns on the JSE. The study provides a number of possible reasons for this finding and concludes by suggesting areas for future research.
|Item Type:||Thesis (Masters)|
|Uncontrolled Keywords:||Finance industry, Efficient Markets Hypothesis, EMH, Behavioural finance, Non-economic events, Stock market returns, Sport, JSE, Soccer, Cricket, Rugby, Sporting performance|
|Subjects:||G Geography. Anthropology. Recreation > GV Recreation Leisure|
H Social Sciences > HB Economic Theory
H Social Sciences > HG Finance
|Divisions:||Faculty > Faculty of Commerce > Economics and Economic History|
|Deposited By:||Philip Clarke|
|Deposited On:||11 Sep 2012 10:16|
|Last Modified:||11 Sep 2012 10:16|
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