Soccer and Stock Market
When reviewing previous papers, we can touch the remarkable role of emotions that would suggest alternative courses of action affecting behavior of individuals and thus the decision-making, As a simple example the incidental anger happening in one situation will elicits automatically a motive to blame individuals in other situations even though the targets of such anger have nothing to do with the source of the anger (Tedeschi & Quigley 1996), and that typically occurs without awareness, as if Emotions play a consistent role, giving a set of responses (behavior, physiology, communication and experience) enabling individuals to deal quickly with encountered problems or opportunities (Keltner et al 2014). At the macro level Researchers found that there’s a positive correlation between the stock market performance across 26 countries and the sunny weather on a given day (Hirshleifer & Shumway 2003, Kamstra et al 2003), on the other hand, stock market performance decline when the country’s soccer team got eliminated from the World Cup (Edmans et al 2007), These types of studies give a promising methods by which measuring of public mood and emotion will be easier.
Thus, the effect of emotion on the behavior of the individual can only be isolated from individuals with high emotional intelligence whom can exactly identify which event caused their emotions and can screen out the potential impact of incidental emotion, in the same context, people whom have been informed about the incidental source of their anxiety showed less impact on their risk estimates (Yip©, 2013).
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Most of early literature on emotion and JDM was constructed on a valence based approach which means that the emotions of the same (sadness, anger, frustration) valence lead to one general impact (Bodenhausen et al, 1994) but since 1998 it has been discussed that this model is not enough to understand and describe relationships between emotions and decisions (Mellers et al 1998).
To illustrate this more ; (Lerner, Li, Valdesolo and Kassam 2014) made a comparison between pair of emotions of the same valence “Anger and Fear” by characterizing them in 6 dimensions “originally identified by Smith and Ellsworth”: certainty, intentional, pleasantness, anticipated effort, activity, control, and others’ responsibility; and they found that anger scores low on the dimensions of pleasantness, and high on certainty, control, and others’ responsibility, while fear involves low sense of control and a low certainty, which means that fearful people are tending to see bigger risk unlike angry people who will tend to see lesser risk, thus even feelings of same valence create different assessments and build different perception of risk.
Consistent within this logic, many studies compared between the effects of incidental sadness and anxiety on hypothetical job selection and gambling decisions, they found that anxiety increased tendencies to favor low reward, low risk options whereas sadness increased tendencies to favor high reward high risk options (Raghunathan & Pham 1999).
According to the conclusion of (Keltner & Haidt 1999); emotion at least may serve 3 functions in interpersonal decision making: (1) help individuals to understand another’s emotions, intentions and beliefs; (2) imposing or incentivizing a cost on others’ behavior (3) evoking complementary, shared, or reciprocal emotions in others.
When emotional influences are unwanted, it is difficult to reduce their effects through effort alone (Emotion and Decision Making 2014)
In a slightly further perspective ; “Carmen Abril, Joaquin Sanchez and Teresa Recio” in their article in “Journal of Advertising Research” 2017 about the reaction of the financial markets to the sponsorship announcement suggest that stock prices will immediately reflect investors’ reactions to newly available information in the marketplace based on investor sentiment towards the sponsoring company so if investors view sponsorships as fruitful investments, will be expected that prices should rise when a company announces investment as a sponsorship.
By analyzing the value creation effect of the announcements of 98 global official sport sponsorships around 15 different countries over 10 years, and these firms represent 50% of the official sponsors of 4 major global tournaments: Summer Olympic Games, America’s Cup, European Soccer Championship and World Soccer Championship, results show that when investors feel functional and national congruence between the sponsoring firm and sponsored property they’ll react more positively to these sponsorships which would be directly translated into sales and thus into higher future profitability.