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England World Cup exit could cost £3 bln

Monday, October 05, 2015 - 01:36

Research conducted by the London Business School suggests Britain's biggest companies could feel the pain now England has been knocked out of the Rugby World Cup. As Joel Flynn reports, it's all about the adverse effect on investor sentiment.

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For English rugby fans, Saturday couldn't have gone much worse. The country was dumped unceremoniously out of a World Cup it was hosting - the first time its ever happened in the tournament. But the bad news might not have ended there. A report from London Business School says the loss could have wiped as much as three billion pounds off the UK's stock market. Professor of Finance, Alex Edmans, says its all about the mood. SOUNDBITE: London Business School Professor of Finance, Alex Edmans, saying (English): "I found for football was that an elimination from a major competition leads to the market going down by 0.5 percent the next day, and for rugby it's 0.15 percent. So you might think "is that a big deal?" But 0.15 percent applied to the UK stock market that is three billion pounds wiped off the market in a single day." Edmans and his colleagues looked at how stock markets perform normally when there's no sport on, and then calculated the difference when there was. This he attributed to the "mood" of investors - supposedly more glum after losing and more optimistic after winning. While things like elections or plane crashes could affect this too, they also affected the real economy. SOUNDBITE: London Business School Professor of Finance, Alex Edmans, saying (English): "Something like sports, it doesn't have an effect outside a few sectors, such as pubs or replica merchandise, and therefore given there shouldn't be an effect on employment, and dividend, and these other fundamental factors, we can attribute almost the entire decline to the impact it has on mood." Worries on China, a Fed rate rise and a slowing euro zone might be at the top of the list for investors when it comes to buying shares. But if Edmans is right then England's losses this weekend might not be confined to the pitch.

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England World Cup exit could cost £3 bln

Monday, October 05, 2015 - 01:36