Investor Sentiment and Sectoral Stock Returns: Evidence from World Cup Games

•It is well known that sport sentiment significantly affects aggregate stock returns.•We study the effect of sport sentiment on US sectoral returns.•We find that sport sentiment has a significant effect on the Financials sector only.•Underweighting Financials during World Cup days generates abnormal returns.

It is well known that investor sentiment affects aggregate stock returns. We investigate the economic link between sport sentiment and US sectoral stock returns. We find that sport sentiment affects only the financial sector. We argue that this result might be explained by the high liquidity that makes the financial sector more attractive to foreign investors who in turn are more prone to sport sentiment than local investors in the US. Accordingly, an arbitrageur can build a profitable trading strategy by selling short the financial sector during the FIFA World cup periods and buying it back afterwards.