The normally hyper-fast world of Wall Street will slow to a dribble around noon Thursday when the NCAA basketball tournament known as “March Madness” kicks off.
Six first-round games are set during trading hours on Thursday and Friday. Basketball-crazed stock traders will have one eye on the Dow and the other on slam dunks. Tournament brackets will take precedent over stock breakouts. TV sets will be tuned to CBS and TBS instead of CNBC.
“For a couple of days, trading could slow — sports first, everything else second,” says Gary Kaltbaum, president of Kaltbaum Capital Management.
This hoop mania isn’t made-up stuff. Things do slow down in the algorithm-driven world of Wall Street. Ph.D.s have actually done research to quantify the “distraction effect.” Jacob Thornock, a professor of accounting at Brigham Young University, co-authored a study published in the spring of 2016 that quantified some of the trading impacts on the first Thursday and Friday of the tournament, when games are streaming on mobile phones and meticulously constructed brackets are being blown up.
His research found that trading activity fell 31% on stocks that released earnings results on the tournament’s first two days from 2000 to 2012. Market reaction to these results, he says, were “muted,” and prices didn’t reflect the news as quickly as they normally do. “We found a modest decrease in the market’s efficiency,” Thornock says. “It shows markets are still human, not totally robotic.”
For a few days, traders are more bullish on basketball than stocks.
“The TV sets go from CNBC to the games,” says Brad McMillan, chief investment officer at Commonwealth Financial Network. “Lots of brackets and trash talk.”