What's The FIFA World Cup Effect On The Stock Market? How to Make Money Off It?

Qatar just lost to Ecuador 2-0 in the opener on Sunday, becoming the first hosts to lose the opening game. Will it impact the stock market? In fact, there's a significant body of academic research has found that mood has a pronounced impact on the stock market.

An article published on the Journal of Finance, entitled "Sports Sentiment and Stock Returns," found that lost soccer matches have a significant impact on stock markets, especially during the World Cup games.

The research investigates the stock market reaction to sudden changes in investor mood. It found a significant market decline after soccer losses. For example, a loss in the World Cup elimination stage leads to a next-day abnormal stock return of -49 basis points. Excess monthly returns on a loss are larger than 7% and strongest for Western European economies and for smaller stocks, the authors wrote. There was no corresponding benefit when teams won.

Another follow-on study found that the average return on the U.S. market over the World Cup's effect period is -2.58%, compared to 1.21% for all-days average returns over the same period length.

But, there is a way for stock investors to make money off the World Cup. It includes correctly predicting surprise defeats for major Western European nations and shorting small-cap stocks from those countries ahead of time.

For the best results, investors would need to wait until the elimination stage of the World Cup, starting Dec. 3. There are plenty of stocks to choose from, as England, Germany, France, Spain, Portugal, Belgium, and the Netherlands are all playing this year.