Lights Out and Away We Go: An Analysis of Formula One Sponsors’ Stock Returns

Abstract

Formula One is a global motorsport that is worth billions of dollars. Sponsorships provide most of the revenue that teams earn, and they play an integral role in the continuing success of F1. From a sponsor’s perspective a spot on an F1 car is a coveted piece of advertising and many sponsors agree upon mega deals with F1 teams to earn that spot. The objective of this paper is to analyze how markets react to race occurrences and results. The intention is to quantify how a sponsor’s stock reacts to a positive or negative outcome during a race weekend. Using data from 17 sponsors across F1 teams with varying degrees of success from 2010-2019, this paper will run two-way fixed effect regressions with a date and company x season fixed effects on variables that measure race occurrence and results. This study found that there is a negative shock on stock returns when a team achieves a top three finish, and other outcomes are not statistically significant.