When a Nation Loses the World Cup, Its Stock Market Falls the Next Day
Research tracking over 1,000 World Cup knockout matches found that fan emotion causes next-day domestic stock markets to drop roughly 0.5%, showing that prices are driven not only by fundamentals but also shaped by emotion.
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National stock markets drop when their teams are eliminated
Research covering over 1,000 World Cup knockout matches shows that when a nation's team is knocked out, the domestic stock market falls about 0.5% the next day—the equivalent of roughly £150 billion in value lost from UK markets. This shouldn't happen. Textbooks say stock prices react only to fundamentals like earnings and dividends. But people are people. Even professional traders cannot completely wall off their emotions from the trading floor. To rule out coincidence, the researchers extended the sample beyond soccer to cricket, rugby, and basketball. The pattern held across all international sports.
— Alex EdmansThe pandemic boosted Zoom, but the market boosted it far too much
Zoom genuinely benefited from the shift to remote work during the pandemic—a real, measurable tailwind. The problem: the stock surged 700%. The market saw only the present moment, not that Microsoft Teams and Google Meet would catch up, and not that people would miss face-to-face interaction once the world reopened. Around the same time, the shoe company Allbirds announced a rebrand to New Bird AI to pivot into AI, despite having no relevant experience in the field. Its stock jumped 582%—purely because it added two letters. This kind of overreaction happens everywhere. A coach gets fired after three bad seasons despite presiding over four excellent ones.
— Alex EdmansBuying yesterday's losers and selling yesterday's winners outperforms the market
Take all stocks and rank them by three-year performance. The worst performers are losers and the best performers are winners. Now run a simple strategy: buy the losers, sell the winners, and hold for three years. The reversal kicks in. Yesterday's losers become tomorrow's winners, and yesterday's winners become tomorrow's losers. This shows the market overreacts in both directions. Emotions push prices too far up and too far down, and then market forces gradually pull them back to reasonable levels.
— Alex EdmansMarkets ignore employee satisfaction even when it hides in plain sight
The Best 100 Companies to Work For list is published every year and freely available—information that is obvious but overlooked. Over 28 years, the companies on this list outperformed similar peers by 2.3% to 3.8% annually. Compounded, that becomes 89% to 184% of additional return. Yet the market does not react when the list drops. Three reasons stand out. First, there is no dramatic announcement—no earnings surprise to remind everyone to pay attention. Second, treating employees well gets tagged as putting humanity before profit, an easy way for the market to dismiss the signal. Third, even if you believed satisfied employees drive returns, you would not know how to adjust the variables in your valuation model to account for it.
— Alex EdmansYou can spot the bubble correctly and still lose everything before it pops
In 1999, Julian Robertson at Tiger Fund looked at Cisco trading at a 190x price-to-earnings multiple—three times Microsoft's multiple and four times Intel's. He was right: this was a bubble. He shorted the stock. But the bubble kept expanding before it burst. Month after month, his fund bled money. Investors pulled their capital. In March 2000, the fund was liquidated. Within weeks, the tech bubble actually did crash. Robertson had been right all along, but he had exited before his thesis played out. Professional fund managers labor under crushing constraints: short-term performance pressure and the ever-present threat of redemptions. The investors who can afford to wait longest—often ordinary families with decades of runway—end up with the edge.
— Alex EdmansMost individual stocks lose to Treasury bonds
Hank Bessembinder's research flips the usual frame. When you look not at the market overall but at individual stocks, the picture darkens. Fewer than three of every seven stocks beat Treasury bonds over their lifetimes. The median stock underperforms Treasury bonds. When stock returns are rounded to the nearest 5%, the single most common outcome is −100% (bankruptcy). So why does the stock market as a whole beat Treasuries? The answer: a handful of mega-winners pull the entire average upward. In 2023, the 493 S&P 500 companies outside the Magnificent Seven gained 12.5%. The Magnificent Seven gained over 100%. Together, they delivered a 26% return for the whole index. This is why diversification is not optional. You have no way to predict in advance which stocks will be the mega-winners.
— Alex EdmansMomentum strategies fail predictably, and failure shows warning signs
Momentum investing sounds simple: buy stocks that have recently gone up, sell stocks that have recently gone down. For most of the time, momentum works. But once it breaks, it breaks catastrophically, and losses pile up fast. The redemptive part: momentum crashes are not random. They arrive predictably after sharp market sell-offs or when the VIX fear index spikes. Here is why. Big market crashes typically trigger rebounds. Rebounds are usually led by the cycle stocks that took the worst beatings—the value plays that got crushed hardest. Momentum strategies do the opposite: they systematically exclude those beaten-down stocks. Momentum investors miss the rebound entirely.
— Alex EdmansMarkets work, diversification pays, and fees determine everything
Strip away the academic complexity and three insights remain. First, markets are fundamentally efficient. Second, diversification lets you capture the returns of the future's biggest winners without needing to guess which companies they will be. Third, fees over decades determine whether you build wealth or watch it erode. Edmans adds one more detail: even if a fund manager truly possessed stock-picking skill, the market would eventually flood the fund with capital until either the skill got diluted by sheer size or fees rose to match the talent. His own emerging-market fund succeeds not through superior stock-picking but through a limited-entry fee structure—which keeps capital at a level where the fee advantage can survive.
In their own words · checked verbatim
if you study over 1000 soccer games after a country is knocked out of the World Cup, the market falls by about a half a percent the next day, which is 15 billion pounds when applied to the UK stock market.
Alex Edmans2:14
in the pandemic, Zoom went up by 700%. And clearly the pandemic was good for Zoom.
Alex Edmans9:44
the stock price went up by 582% because anything which has an AI label attached to it was heavily lauded.
Alex Edmans10:32
these companies beat their peers by 2.3% to 3.8% per year. That's 89% to 184% compounded.
Alex Edmans13:34
they withdrew money from him and liquidated him in March 2000. And then almost right on cue, the tech bubble collapsed.
Alex Edmans23:04
sometimes you don't need unique information. All you need is patience and a longer horizon.
Alex Edmans24:08
fewer than three stocks in seven beat treasuries.
Alex Edmans31:49
Markets work, diversification is your buddy, and costs matter.
Figures
| Zoom stock appreciation during pandemic | 700% | 9:44 |
| Allbirds stock surge after rebranding to New Bird AI | 582% | 10:32 |
| Best 100 Companies to Work For, 28-year excess returns | 2.3%-3.8% annually, 89%-184% compounded | 13:34 |
| Cisco P/E ratio, 2000 | 190x (3x Microsoft's, 4x Intel's) | 17:46 |
| Published anomaly return decay, McLean & Pontiff study | approximately one-third | 26:11 |
| Individual stocks outperforming Treasuries, Bessembinder research | fewer than 3 of 7 | 31:49 |
| S&P 500 returns, 2023, ex-Magnificent Seven | 493 companies +12.5% (Magnificent Seven +100%, total +26%) | 32:22 |
| ARK fund assets under management | $4 billion to $60 billion (approximately 15x) | 55:26 |
| Clare College 2048 Fund equity allocation, 2009 | 15 million pounds | 25:10 |
Glossary
- limits to arbitrage
- Even when you correctly identify that a market is mispricing an asset, you may not be able to profit from it due to capital constraints, time limits, or risk management rules.
- law of one price
- Assets with identical future cash flows should trade at the same price, but real markets often violate this principle.
- big market delusion
- Adding up the total market value of all companies in an emerging industry produces a number far larger than the total economic value the industry can actually create.
- illusory truth effect
- The more frequently a piece of information is repeated, the more likely people are to believe it to be true or to attend to it.
- equity premium puzzle
- Stock market returns exceed risk-free Treasury returns by far more than rational risk aversion alone can explain.
How to listen
Individual investors and fund managers interested in behavioral finance, and anyone who wants to understand the psychological mechanisms behind market anomalies.