When Pep Comes Calling, the Oil Market Answers: The Effect of Football Player Transfer Movements on Abnormal Fluctuations in Oil Price Futures

Abstract

We examine the effect of player-transfers entered into by football clubs owned, or financed, by individuals who are key players in the oil market on abnormal returns in oil futures. In oil-financed football clubs the sums expended buying players frequently far exceeds the amount received from selling players in the player-transfer market. We find that in order to finance these deficits in the player-transfer market, the owners exercise their market power to adjust the oil spot market, resulting in higher abnormal oil spot returns. We also find that these spot price adjustments are reflected in abnormal returns in the futures market. The exception is when the deficit in the player-transfer market is above a very high threshold, which is typically only the case when the highest profile players in football are transferred. The high-profile transfers attract widespread media attention, making oil futures investors aware of the potential transmission from the player-transfer market to the oil market on a wide-scale, which dissipates the effect of a deficit in the player transfer market on abnormal returns in oil futures.

Keywords: Crude oil; Futures markets; Football economy; Player-transfer market; Media coverage

JEL Classification: Q41; Z21; Z23;