CHAPEL HILL, N.C. (MarketWatch) — Here’s some important investment advice if you are a die-hard soccer fan: Take a break during the World Cup.

If you’re like most soccer-crazed investors, you are prone to act irrationally when your favorite team loses — such as letting your despair lead you into selling indiscriminately.

Just take Spain, the defending World Cup champion, which suffered a stunning upset last Friday night at the hands of Netherlands. Spain was humiliated, losing 5 to 1.

On Monday, the first trading session in the wake of that loss, Spanish stocks fell 1% (as judged by the FTSE Spain index). That’s more than double the 0.42% loss suffered by the European market as a whole.

#WorldCup on way to be most talked about sporting event

Nor was Spanish investors’ behavior unusual. Consider a rigorous academic study that appeared in the August 2007 issue of the prestigious Journal of Finance. The study, “Sports Sentiment and Stock Returns,” was conducted by finance professors Alex Edmans of the Wharton School of the University of Pennsylvania; Diego Garcia of the University of North Carolina (Chapel Hill); and Oyvind Norli of the Norwegian School of Management.

After studying more than 1,100 soccer matches, the researchers found that, on average, a given country’s loss in the World Cup elimination stage is followed by its stock market the next day producing a return that is significantly below average.

Not surprisingly, the researchers could find no rational explanation for the lower returns. They therefore concluded that those diminished returns were caused by the “impact of sports results on investor mood.”

Other than reminding us all of the crucial role our moods play in investing, is there any specific way to exploit this research? That seems impossible, unless you knew in advance which teams were going to lose.

But perhaps there is a way. That’s because the professors found no corresponding positive market effect for countries whose soccer teams win. The reason for this, they speculate: A win merely means that a country’s team advances to the next round, while elimination is final. So losing teams’ fans are likely to be more despondent than winning teams’ fans will be exuberant.

The logical consequence of this asymmetry: Stocks around the world should experience above-average amounts of selling throughout the World Cup and, therefore, below-average returns. And, sure enough, that is exactly what was found by another academic study, this one by Guy Kaplanski of the Bar-Ilan University in Israel and Haim Levy of the Hebrew University of Jerusalem.

For example, they found that “the average return on the U.S. market over the World Cup period is minus 2.58%, compared to plus 1.21% for all-days average returns over the same period length.”

By the way, over the first three days of this year’s World Cup alone, the S&P 500 Index SPX, -1.11% has already fallen 0.3%.

The bottom line? Maybe all investors — not just diehard soccer fans — should take a break from investing until the World Cup is over in mid-July.

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