The economics of the FIFA Football World Cup

The expansion of economics to ‘non-market topics’ has received increased attention in recent years. The economics of sports (football) is such a sub-field. This paper reports empirical evidence of team and referee performances in the FIFA World Cup 2002. The results reveal that being a hosting nation has a significant impact on the probability of winning a game. Furthermore, the strength of a team measured with the FIFA World Ranking does not play the important role presumed, which indicates that the element of uncertainty is working. The findings also indicate that the influence of a referee on the game result should not be neglected. Finally, the previous World Cup experiences seem to have the strongest impact on referees' performances during the game.

The jump component of S&P 500 volatility and the VIX index

Much research has investigated the differences between option implied volatilities and econometric model-based forecasts. Implied volatility is a market determined forecast, in contrast to model-based forecasts that employ some degree of smoothing of past volatility to generate forecasts. Implied volatility has the potential to reflect information that a model-based forecast could not. This paper considers two issues relating to the informational content of the S&P 500 VIX implied volatility index. First, whether it subsumes information on how historical jump activity contributed to the price volatility, followed by whether the VIX reflects any incremental information pertaining to future jump activity relative to model-based forecasts. It is found that the VIX index both subsumes information relating to past jump contributions to total volatility and reflects incremental information pertaining to future jump activity. This issue has not been examined previously and expands our understanding of how option markets form their volatility forecasts.