Apparently, with records going back from 1994, World Cup have been consistently correlated to -0.3% to -25.5% to equity market in second quarter of the World Cup year.
Credits to DBS Bank analyst who compiled this table for World Cup's impact on Straits Time Index level.
The effect was attributed to rotation of funds from equity markets to sports markets (more like gambling casino) where people would withdraw funds from stock markets and speculate on World Cup matches.
There's even professional arbitragers that try to take bets and arbitrage on the different rates offered by various bookies / betting houses, thus locking in to the spread regardless of what the results went.
Eg. Bookie A takes bet of $1000 from various parties whom bet on Match 1, home team to win, the bet is accepted at a rate of 2.1x payout, ie if home team win bookie A is to pay $2100 to the parties. One way to arbitrage on betting markets, is for bookie A to unload the bet of $1000 to other bookies / gambling house that later increase the rates to say 2.3x as most have fluctuating rates depending on the bets they receive to spread out their risks.
However, for bookie A, once he secured the higher rate of 2.3x, he is effectively risk free and sure win especially if this is repeated often enough with larger / wider bets received. If home team win, he is locked into 2.3x and would earn 0.2x spread of $200 after paying out $2100 back to the parties.
If away team win, then he has no loss to pay since he already offload the risk & monies to other gambling houses. The only risk is counter party risk where say if home team win, the other gambling houses ran away and failed to pay.
That's for today, I may be writing more blogs moving forward as I am pondering a change in my investing strategy and as I reflect on 3 major blows that hit my returns this year. More in my next week's blog, see you!
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