By Mark Hulbert
Fans of losing teams are more likely to dump shares than winners are to buy
On average, the stock market has performed significantly worse during March Madness than during all days in March and April.
March Madness is here - so you might want to lighten up on stocks until the annual NCAA Division I men's college basketball tournament ends on April 6.
That's because of a growing body of research documenting below-average stock-market performance during major sports tournaments (including soccer, cricket, rugby and basketball, among others). This body of work traces to a now-famous 2007 study in the Journal of Finance entitled &#34;Sports Sentiment and Stock Returns.&#34;
The source of the stock market's below-average returns during widely followed sports tournaments is the behavior of investors whose favorite team has lost and thereby eliminated from competition. Their mood tends to darken considerably, leading them to be more likely to sell their stock holdings and less likely to buy. The net result is that the stock market experiences below-average returns during the tournaments.
You might wonder why this negative effect isn't counterbalanced by the more upbeat mood of investors whose favorite team has won. For every loss there is a corresponding win, after all. But the researchers found little evidence of this counterbalancing effect, perhaps because a win only means that the team survives to play another round in the tournament - in contrast to a loss meaning that the team is out altogether. For this reason, according to the researchers, investors who are fans of a losing team will be more demoralized than the winning team's fans will be exuberant.
Look at the chart above. It plots different market indices' average daily returns during all March Madness tournaments since 1982, and compares them with those indices' average returns for all days during March and April. As you can see, the market SPX DJIA on average has performed significantly worse during March Madness than during all days in March and April. (I chose to base the chart on data back to 1982 because, according to Time magazine, that is when ESPN announcer Brent Musburger made the term &#34;March Madness&#34; famous when referring to the NCAA tournament.)
Particularly telling is the performance of the Nasdaq composite COMP, which reflects the segment of the market that is especially prone to changes in investor mood. That index has actually produced an average loss during all March Madness tournaments since 1982, in contrast to an average gain during all of March and April.
If anything, furthermore, sports sentiment should be having a bigger impact today than in recent years. That's because losing teams' fans will be upset not just because their teams have lost, but because of the monetary losses associated with losing their sports bets. The consulting firm H2 Gambling Capital projects that U.S. sportsbooks will take in about $4 billion in bets during this year's tournament. To put that in context, that compares to an estimated $1.4 billion in bets during February's Super Bowl.
The bottom line: If your favorite team is in the March Madness tournament, and especially if you have bet money on the outcome, sit on your hands until the tournament is over.
Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at mark@hulbertratings.com
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-Mark Hulbert
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03-18-26 0810ET

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The stock market tends to perform worse during March Madness, according to research. Investors whose teams lose are more likely to sell stocks, leading to below-average returns. This effect is not counterbalanced by winning teams' fans, as losses create more significant emotional impacts. Historical data shows that indices like the Nasdaq have averaged losses during March Madness since 1982. With increased betting this year, the negative sentiment may be even stronger. Investors are advised to hold off on trading until the tournament concludes on April 6.

- The stock market tends to perform poorly during March Madness due to investor mood swings, particularly among fans of losing teams who are more likely to sell shares.  
- Research shows that since 1982, indices like the Nasdaq have experienced average losses during the tournament, contrasting with gains in other March and April days.  
- With an estimated $4 billion in sports bets this year, the negative impact of losing teams’ outcomes could be exacerbated, suggesting investors should hold off on trading until the tournament concludes.

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