Market valuation and risk profile of listed European football clubs

The purpose of this paper is to explore whether stocks in football clubs are valued in line with the valuation of other capital assets in the capital market. Moreover, it analyzes the risk profile of football stocks. By taking this perspective, the paper also contributes to the discussion on the motives of those who invest in football clubs, particularly the question of whether they expect extra benefits, i.e., in addition to dividends and share price appreciation, from the investments.

The empirical study analyzes the share prices of 19 listed European football clubs from January 2010 to December 2016. Building on the capital asset pricing model, the authors used Zellner’s (1962) seemingly unrelated regressions.

The results indicate that the majority of the football clubs in the sample are overvalued. This implies that investments in football stocks are mainly attractive for those investors who expect to derive extra benefits from their investment. That might be likely for strategic, patron and fan investors, but not for purely financial investors.

As a next step, more advanced factor models could be applied to the analysis.

For investors, the results imply that portfolio diversification is particularly beneficial while buying football stocks. For football clubs, the rather low general market risk, combined with the overvaluation, leads to low equity costs when new shares are issued.

The results suggest that dividends and share price appreciation are not the only benefits football stock owners derive from the stocks, thus underlining that further investigations in their motives to hold football stocks are very promising.