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Celebrities and stock market fluctuations: correlation or causation? By: Prachi Joshi (FORE School of Management) It isn’t unusual to be in the news when you are one of the best football players in the world, especially during the UEFA European Football Championship. It is however a bit uncommon for those write-ups to feature in the business and finance section instead of the sports section of the bulletin. As it turns out, Christiano Ronaldo has accomplished that feat. The Juventus forward recently made headlines for allegedly causing a whopping $4 Billion loss to coca-cola at a press conference after he moved two coca-cola bottles, choosing water over the soft drink. Following Ronaldo’s lead, Italian footballer Manuel Locatelli did the same thing. A similar act was performed by French midfielder Paul Pogba who removed a Heineken bottle from his view at another press conference. Both these beverage makers being top tier sponsors of the football championship had their products prominently displayed at the media events as a part of the commonly practiced product placement strategy. This act led to the UEFA issuing a notice to the players telling them to refrain from removing sponsors' products during press conferences. There was a 1.6% decrease in the share prices and a $4 billion fall in the market value of cocacola. Ronaldo was blamed for both of these. This isn’t the first time when a public figure has been blamed for stock market movements. Back in 2018, Kylie Jenner’s tweet stating she doesn’t use snapchat anymore was blamed by many for a $1.3 billion decrease in the market value of the parent company. We live in a world where tweets by people such as Donald Trump and Elon Musk have been known to prompt movements in the stock markets. Be it the Tesla founder’s influence on prices of cryptocurrency or the former U.S. president’s peculiar tweets led to the creation of ‘The Volfefe index’ - an index created by JPMorgan to measure the impact of then U.S. president’s tweets on the country’s treasury bills. This raises an important question - Can celebrities significantly influence stock prices and market value? Are these merely coincidences or do these people really wield that kind of power? Before we answer this question, it is important to understand the difference between correlation and causation. It is important to note that “correlation does not imply causation” Causation indicates a cause and effect relationship. For instance, when the sales of popsicles increase, the number of deaths by drowning also increase. Does this mean that consumption or sale of popsicles is the cause for drowning?
