The Impact of Covid-19 on Football Club Stock Integration and Portfolio Diversification

Abstract

Ali Aboudi Nehme, Anwar Mustafa Hasan, Akram Salim H. Al-Janabi, Ghazwan Ayad Khalid Al-Shiblawi, Mazen Dawood Salman, Hala Ayyed Hadi, Mohammed Faez Hasan, Ahmed Hafedh Hameed Al-Taie, Bushra Fadhil Khudhair Al-taie, Sallama Ibrahim Ali, Nawfal Ghazi Zghair, Rabab Wahhab Maseer, Hakeem Hammood Flayyih*, Mustafa Khudhair Hussein, Ali H. Al-Saedi, Salam Abdul Rahman A.A. Al-Ibraheemi and Karrar Kareem Jawad

This paper investigates the impact of the COVID-19 pandemic on the integration and diversification potential of European football club stocks. Football clubs represent a unique asset class with ties to geographic regions yet distinct brand identities. Using stock data for 14 major clubs before and after March 2020, we examine how COVID-19 altered correlations between equities. We find increased market synchronization, with higher correlations over 0.3 post-pandemic, indicating tighter relationships especially along country/league lines. However, some differentiation based on firm-specific factors persists. Our analysis shows constructing optimized portfolios can still enhance returns versus equal weighting, but managing risk is more difficult. Overall, while COVID-19 integration presents diversification challenges, opportunities remain by carefully selecting assets with moderate correlations. This study provides investors and academics insight into how a major crisis reshapes football stock dynamics, increasing systematic risk exposure. It highlights the need to reevaluate assumptions underlying portfolio construction in light of shifting correlations.