From Stadiums to Stock Markets: What Home Advantage Can Tell us About Investment Decision Making.

Published in The Sunday Times on 4th January 2026.

Home advantage is one of the most well-known ideas in sports, and yet one of the most misunderstood. 

Take your pick of sports – home advantage is striking. 

In basketball, NBA teams win 62.7% of their home games. The win rate for home teams in Rugby and American Football is very similar, around 58%. Soccer has the largest average home advantage (defined as home unbeaten rate as draws dilute the numbers) across leagues —ranging from a low of 60% winning rates in Asia/Africa to a high of 69.1% in US Major League Soccer. 

Why do home teams win so often?

In their book Scorecasting, authors Moskowitz and Wertheim compiled statistics on the probability of teams winning when they play at home and attempt to answer the question – why do home teams win so frequently? 

Is it the crowd support bringing out an extra level in player performance? 

Anyone who watched Leinster’s away clash with Leicester last weekend would likely agree that the raucous Welford road crowd gave the home side a significant boost – at least in the first half. But Moskowitz and Wertheim were unable to find persuasive evidence that crowds on their own do anything to affect player performance. 

Another oft-cited reason is familiarity of the ground to home team players providing an advantage. Again the authors find no evidence to support this. Other reasons cited are scheduling rigour of home fixtures being less arduous and travel being tough on players for away teams. Neither offers a convincing explanation. 

Referee bias

The largest impact on home-team wins comes from a more insidious source according to the authors - referee bias. They document cases of referee bias in baseball, American football, basketball, and ice hockey. And in soccer the most convincing evidence for referee bias comes from Professor Canice Prendergast who studied the Spanish soccer league. 

Prendergast calculated that the average stoppage time in matches was 2.93 minutes. When the crowd wants the game to continue, i.e. the home team is behind, the researchers find that referees add 35% more stoppage time than average - 3.95 minutes of extra time. When the crowd wants the game to be over, i.e. the home team has a narrow lead, referees add 29% less stoppage time, or 2.08 minutes, on average. Stoppage time remains around the average of 2.93 minutes when one team is far ahead. The author asks the question so often yelled at matches, “Are you blind, ref”….the answer to which he finds is, Yes in a sense. 

There’s a simple enough explanation for this. Referees are human — they subconsciously respond to crowd noise, social pressure and environmental cues. And that bias is strongest in ambiguous situations where judgment is required.

Referee behaviour is analogous to investors

All of these behaviours are analogous to behaviours we see in investment markets, where judgement is central. 

Crowd pressure influencing referee calls, is a classic case of herding bias - following market sentiment or trends because “everyone else is buying”. 

Added time favouring the home team when trailing is a version of confirmation bias – giving extra weight to data that supports your existing view (e.g., bullish outlook).

There’s been much debate about AI and whether it’s a bubble or not. I’ve written a few times on this topic already in September 2025 and November 2025. But I think there’s another important take away from these sporting analogies. 

A German study found that in soccer pitches surrounded by running tracks—which insulate the pitch from the crowd—referee bias diminishes markedly. 

As an investor, you can’t afford to let the crowd dictate or influence your decisions. You need to use an objective framework when investing. The late Charlie Munger, Warren Buffett’s business partner, had much to say about this. 

The crowd is not always wrong

The “crowd” in financial markets is not inherently bad— it’s essential for functioning markets. Each investor brings unique insights. Collectively, the market reflects a broad set of expectations about fundamentals, risk and growth. In liquid markets, this leads to efficient pricing - prices often approximate fair value because they incorporate diverse views and data. 

The risk arises when social pressure overrides independent judgment, turning collective wisdom into collective bias. When crowd behaviour shifts from rational aggregation to emotional contagion prices no longer reflect  fundamentals.

In periods of hype (arguably today with regard to Artificial Intelligence), the crowd amplifies sentiment rather than fundamentals. Like referees under crowd pressure, investors can overweight popular opinion instead of objective analysis.

Munger’s latticework of mental models

He advocated building a latticework of mental models—a multidisciplinary toolkit for decision-making. This is the ultimate objective framework. In economics  you have the idea of opportunity cost and incentives. In psychology you have biases and misjudgement. In maths you have important concepts like probability and compounding. And the engineering or biological principle of feedback loops are important. 

If this all seems like hard work, it’s because it is. Munger would say “You’re not going to get very far in life by just copying the crowd.” Most of the time copying the crowd in financial markets is a perfectly good strategy. 

At certain points though it seems like exercising expert judgement to lean against the prevailing trend makes sense. But you need advice or a lot of experience. And sometimes both.   

Gary Connolly is Investment Director at Davy. He can be contacted at gary.connolly@davy.ie or on X at @gconno1.