We investigate whether unexpected US sports outcomes (underdog wins) affect retail investor behaviour. We conjecture that the mood boost and satisfaction that retail investors receive from witnessing an underdog win will affect their risk tolerance, and therefore cause them to buy more shares. We demonstrate that there is a positive relationship between the proportion of surprising outcomes in sports and the next-trading-day investor stock buying activity. We are able to rule out that this effect is due to investors using their sports gambling winnings in the stock market, or due to witnessing their local teams win or lose. The effect is greater in magnitude for stocks that are more sensitive to changes in sentiment. We also show that our results are mainly driven by investors’ dislike of ‘big’ teams, a representation of Schadenfreude. The effect appears to be short-lived and only affects the investor behaviour on the following trading day. Finally, we do not document any significant impact on stock returns.
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