Quantifying speculative-bubble effects in major European soccer leagues

Abstract

We apply the theory of super-exponential rational bubbles to football transfer data. Refining previous qualitative approaches we model the aggregate transfer spend as a fraction of the TV income. Evidence of substantial bubble effects is found across the English, French, German and Italian leagues. This suggests long-term reductions in transfer spending relative to TV receipts. Our model predicts the existence of other signs of soccer bubbles beyond over-pricing. These include differences in the market for star players and the market for regular players and other signs of illiquidity.