Reexamining sports-sentiment hypothesis: Microeconomic evidences from Borsa Istanbul

•Provide microeconomic evidence to test the sports event sentiment hypothesis using firm-level data of Borsa Istanbul.•Once using panel data analysis and modeling spatial and temporal effects explicitly, we find that international soccer games virtually have no power explaining stock return variation.•Introducing a surprise match result variable does not help neither.•However, we found evidence that sporting events have larger impact on stock return volatility for firms with smaller market capitalization and lower past returns. This paper examines the impact of international soccer matches on the Turkish stock market using firm-level and sorted-portfolio data. Applying Edmans et al. (2007) estimation method, we found a significant negative loss effect. However, once using panel data analysis as well as modeling spatial and temporal effects explicitly, the sports-sentiment effect disappeared. The same conclusions could be made by replacing win (loss) dummies with unexpected win (loss) variables, removing Monday matches, dropping sports-related firms, and sorting portfolio returns by market capitalization and past returns. Hence, there is very limited micro-evidence to support the ‘overreaction’ hypothesis of individual investors using Borsa Istanbul data. However, we found evidence that sporting events have a larger impact on stock return volatility for firms with smaller market capitalization and lower past returns.