As if there wasn't already enough pressure on the Argentine and German national teams in the World Cup final on Sunday, here's more: A loss could hurt their entire economies.
That's the latest warning from Alex Edmans, a professor at the London Business School and the Wharton School of the University of Pennsylvania, on Friday. The prediction comes from his 2007 study in the Journal of Finance that found a link between World Cup losses and sharp declines in the losing country's stock market the following day. Edmans's study used 1,100 soccer matches from 1973 to 2004 from the World Cup, the European Championship, Copa America, and the Asian Cup.
For many countries around the world, soccer is a national interest, tied to the self-esteem of its citizens. Soccer affects people's moods, and a win or a loss means that people feel better or worse about themselves and life in general. For investors, their moods have been shattered so much by the soccer game that the markets in turn go down.
According to Edmans's study, elimination from a major international match saw a 38-point decrease in the losing country's stock market. A loss in the World Cup, however, is much more pronounced, with a 49-point decrease the day after a loss. And that's just an average of all elimination games (Round of 16, Quarterfinals, Semifinals, and Final). A loss in the World Cup final would mean a much higher stock-market loss.