We exploit an interesting setting of Korean professional baseball league to examine whether sports sentiment affect investor behavior at the stock and/or fund levels. Korean baseball league is different from the Major League Baseball in the U.S. in that teams are explicitly associated with chaebol conglomerates, generating a direct and cross-sectional variation in investor sentiment. Using daily fund flow data, we find evidence of significant outflows from funds that hold a large weight on a conglomerate member following the team’s loss the previous day. This effect is the strongest among online retail funds, and this outflow does not appear to be driven by the investors’ prescient response to poor future returns. At the stock level, we similarly document significant net selling of conglomerate member firms by retail investors following the team’s loss. Using these cross-sectional variations, our paper uncovers strong evidence of behaviorally-motivated investment decisions driven by sports sentiment.

JEL Classifications: E52, E58, G14, G23
Keywords: Equity mutual funds, sentiment, sports game results, fund flow