Aiding the betting

The Melbourne Cup, the horse race that stops this nation, runneth over to the stock markets, showing once again that there is very little about the markets that is rational.

Cup fever rubs off on market

IT MAY be the race that stops the nation, but the Melbourne Cup appears to have the opposite effect on Australia's sharemarket.

Buoyed by feelings of elation on race day, Australians plunge huge amounts of money into shares, sending Australian Stock Exchange returns soaring way above usual levels, a new study has found.

University of Wollongong Professor Andrew Worthington, who looked at stock exchange data for every first Tuesday in November over the past 45 years, discovered returns were up to six times higher than average returns for regular Tuesdays.

The returns were almost four times higher than average returns for all other days in the trading week, the study found.

Professor Worthington said the "positive national mood" on Melbourne Cup day inspired people into "irrationally optimistic market behaviour".

He said the Melbourne Cup was an economically neutral day and there was no economic reasons for it to affect the stock exchange.

"From a purely economical standpoint, Melbourne Cup day shouldn't make a lot of difference," Professor Worthington said.

"In fact, given that it's a public holiday in Victoria, you should tend to think that it [the stock exchange] might be down."

He said it seemed the race even inspired people who did not ordinarily invest in shares to "take a punt".

"It seems to be something very widespread," he said. "It doesn't seem to be confined to just retailers, for example. It's a lot more pervasive than that."

Professor Worthington said the common perception of investors as "informed and methodical" was undermined by the research, which pointed to human emotions being very much in play when they made their investment decisions.