The Role of Supporters

December 23, 2011

A good number of academic papers have considered the role played by supporters in the economic model of sports. I personally have a paper in the IJSF considering a particular theory surrounding home advantage in football (soccer), where we propose a monitoring theory: Once television became prevalent, players could no longer slack in away games and get away with it. The implication was that the supporters are what matters, rather than any of the other factors usually posited (familiarity with surroundings, etc).

Others have looked into whether supporters have a role influencing referees to add more minutes of injury time at the end of matches, and whether they influence referee decisions moreover. The literature is rich, it’s fair to say and I won’t do justice to it in this post.

I’m reminded of this by recent events at Premiership team Blackburn Rovers. Blackburn have had heady days in recent decades: They are, aside from the usual suspects (Man Utd, Arsenal and Chelsea), the only other team to have actually won the Premiership, hard to believe as that may be. In recent days, they were yet another top English team taken over by foreign owners as the closet xenophobic British press (and bloggers) have had some fun pointing out in recent years: They were taken over in 2010 by the Venky’s of India, to great fanfare.

However, all has not gone swimmingly for English football’s first Indian owners. They sacked exceedingly competent manager Sam Allardyce in December 2010 for no obvious reason, and replaced him with an complete unknown, Steve Kean.

Perhaps unsurprisingly, the fans weren’t overly excited by that appointment, and things have not gone particularly well since, and as of Tuesday this week, they sit at the bottom of the Premiership with just two wins all season. Tuesday however was notable in that it marked the latest high (or low) point of the campaign of Blackburn fans to have Kean sacked and replaced. As far back as their first win of the season (against Arsenal), Blackburn fans were stages regular protests against the manager.

On Tuesday, against Bolton, local rivals, farcical defending put Blackburn 2-0 down early in the game and it’s said the atmosphere in the stadium was “poisonous” – the Twittersphere was rife with Tweets from folk who left at half time in protest – including notably the Everton coach David Moyes. Blackburn put in a vastly improved second half performance but fell to a 2-1 defeat to sink to bottom (Bolton had previously been bottom of the table).

What this whole sorry episode suggests perhaps more than anything is the role fans play. Of course, we don’t know how Blackburn might have performed on Tuesday had supporters instead turned up to support their team instead of to protest against the coach (and also the owners now – typing Venkys and Blackburn into Google reveals a lot of vile against the Indian owners). Anecdotal evidence is pretty conclusive though; when a set of supporters decides against a coach, even if the owners try to persist with the coach, supports usually get their way. Abusive chants, poisonous atmosphere at games, abuse in the streets, abuse of friends, relatives, etc., all take their toll usually. It seems hard to believe that Kean can take much more of what he’s currently enduring in deepest, darkest Lancashire (it’s hard also to believe that Northern folk are generally perceived to be more friendly!).

Personally I can only think of one example where supporters have been proved wrong, and that was when Martin O’Neill took over at Leicester many years ago. After a few initial defeats supporters were protesting. A few years later and a few League Cups and European nights, I think they forgave him for those early defeats.

Fans would appear to be pretty powerful stakeholders in the model of the football club, casting their judgement on a particular manager or player, and usually getting their way even if those with the actual power (chairmen, managers, players) don’t agree.


Super Bowl Ads and Stock Prices?

February 8, 2011

A paper titled “Super Bowl Advertising Effectiveness: Advertisers Experience Stock Price Gains” has gotten a lot of press in the past few days.  The paper claims to contain evidence that stock traded by firms who advertise on the Super Bowl broadcast outperform the S&P 500 by 1% in the 10 days around the game.  Many of the links to the media coverage can be found here, in a news release from the University of Wisconsin- Eau Claire.  I have not been able to find a copy of the paper anywhere on line.  A three page summary is available on page 309 of this document which is some sort of conference proceedings from 2008. THis may be the only published version of the paper.

Based on this summary, the authors use an event study methodology to address this question.  The basic idea is to collect stock price data from those companies that advertise on the Super Bowl broadcast and regress their returns on the S&P 500 returns, looking for excess returns.  I don’t believe the results for two reasons.  (1) What if better performing companies are more likely to advertise on the Super Bowl?   (2) What causal mechanism would generate an increase in sales before the ads were viewed?  The analysis period for the event study is 5 days before and 5 days after the game.  The idea is that simply knowing that a company will advertise on the super bowl is enough to increase the stock price.  Since the commercials are not shown at the beginning of the event period, the paper implicitly assumes strong-form market efficiency in order for this effect to appear.

Hat tip to Newmark’s Door.

A New Method of Forecasting?

July 6, 2010

Time series econometric methods, and other economic methods, have long been maligned for their inability to generate accurate forecasts.

Perhaps all along we’ve been looking in the wrong place for accurate forecasts:

More on Football and Stock Returns

June 24, 2010

Last week I discussed a working paper that purported to contain evidence that stock returns declined during the World Cup.  I expressed some doubts about the results.  Today, I ran across a link to a paper that is forthcoming in the Journal of Finance (for the non-academics in the audience, this is the top general interest journal in finance) that contains similar evidence.  The paper examines the relationship between short term (returns on the day following the match or game) abnormal returns on broad stock market indicators in Argentina, Brazil, England, France, Germany, Italy, and Spain.  The results indicate a decline of 0.49 basis points on the day following a loss in a World Cup elimination game, and similar declines following elimination losses in other international competitions and group games in the World Cup.  The explanation for the result is that losses affect investor mood.

The results  in this paper are stronger than those in the working paper I discussed last week.  Short term abnormal returns are a more appropriate place to look for this sort of evidence than average return over a month, and the econometrics in this paper are solid.  It also contributes to a growing literature that documents the relationship between sport outcomes and stock markets.  Another interpretation for this results is that they reflect the sort of productivity losses Jimmy commented on yesterday.

The World Cup and Stock Market Performance

June 18, 2010

I stumbled on a  new working paper that examines the return on the S&P 500 Index during the World Cup over the last 60 years.  The study concludes that the S&P 500 declined by 2% on average during the Cup, so shorting the S&P 500 would have been a profitable investing strategy.  The author claims that this decline reflects reduced productivity while the Cup is played (for the record I have the France-Mexico match on the TV while writing this post – what productivity decline?), much like the well-documented calendar effects.

The “paper” has the lousiest formatting I have ever seen (black background? yeah, that’s a great idea!), and is a little sketchy on methodological details.  My biggest problem with the paper is the use of the S&P 500.  People in the US don’t really care passionately about the World Cup.  I think the onus is on the author in this case to convince readers that the observed returns are not simply spurious.  Why not use an international stock index of some sort?  I would be more convinced if the DAX or FTSE declined during the Cup.

More World Cup Economics and Econometrics (or Quants)

June 10, 2010

Nick’s beaten me to posting about the World Cup predictions of large financial institutions, but I’ll follow on from there.  We’re now just over 24 hours until the World Cup starts with Mexico taking on the hosts, South Africa.

As mentioned, a number of large financial corporations have placed their hat in the ring to forecast who will win the World Cup, and of course also who will be the big winners economically.  Chances are it won’t be South Africa, but that’s another blog post or two.

Anyhow, from the FT we find that Danske Bank picked Brazil based on a quants model (to the best of my ignorance, quants model basically means some form of econometric model to the rest of us?), UBS followed suit with the South Americans although JP Morgan bucked the trend and picked England to win.  If you’re interested, you can take part in a competition to try and beat the predictions of the banks here.

I have decided to make some predictions, and to use econometrics and data to do so.  I’ve estimated an ordered probit model based on around 3000 historical football matches (a whole range of competitions including importantly the qualifiers from all regions of the world).  Perhaps unsurprisingly I find that Brazil wins – beating Spain in what would be a tasty final.  England make the semi-finals, as do Germany (England losing to Brazil, Germany to Spain in a re-run of the Euro 2008 final).

Of course, this is all conjecture and probability.  We shall see who comes out on top and which model is best.

On to South Africa vs Mexico though.  Nick fancies Mexico, and I do too based on my model: It gives them a 56% probability of winning, South African only a 24% probability of winning.  But Betfair isn’t so sure: As of 11am British Summer Time, Mexico are at 36%, with South Africa at 34% (probabilities implied from the decimal odds there).  I’ve done a fair bit of research on Betfair (which will hopefully be published soon), and their implied probabilities are usually very accurate indeed.

Are they able to better take into account factors such as the first World Cup on African soil, those horns the fans will be blowing, and all the other emotions associated with a World Cup that mean events like Cameroon beating Argentina in 1990 and Senegal beating France in 2002 can happen?  We shall soon see…

Are Top Athletes Smarter?

May 24, 2010

Here’s a link to an interesting article from Discover magazine.  The article summarizes recent research from neuroscience that concludes elite athletes are not only physiologically different from the general population, but their brains also function differently.  According to the article, “Athletes may perform better than the rest of us because their brains can find better solutions than ours do.”  It’s an interesting idea, and completely consistent with findings from economics – a large body of economic literature concludes that people with greater mental ability earn more than those with less mental ability.