Exchanges of countries that host Olympics outperform for six months after event finishes, research indicates
As the pole vaulters, wrestlers and soccer players celebrate victories and recover from defeat at the Olympic and Paralympic Games, the London Stock Exchange may be starting a six-month sprint for gold, according to a new study by business advisory firm Deloitte.
The study, which tracks from the Los Angeles Olympics of 1984 to the Beijing games in 2008, shows the stock exchanges of host countries have all outperformed other major exchanges by between 5.1 percent and 37.3 percent for six months after the events.
‘While the current economic woes blighting the eurozone cannot be overlooked, history shows that host countries’ stock markets do benefit in the short term from the Olympic Games,’ comments James Ferguson, capital markets partner at Deloitte, in the research. ‘The exchanges of the host countries are all very different so the reasons for the over-performance are complex to analyze.’
In the six months following the 1984 Los Angeles games, the S&P 500 gained 20.2 percent, the study shows. That’s 5.1 percentage points more than the average 15.1 percent gain of the FTSE 100, Nikkei, CAC 40, DAX, Zurich MSCI and Hang Seng indexes, according to Deloitte.
In the six months after the next Olympic Games, in Seoul in 1988, Korea’s KOSPI gained 51 percent, compared with an average 16.6 percent gain in the other indexes.
The S&P 500 enjoyed a double Olympic boost, jumping 23.2 percent in the half-year after the Atlanta games in 1996 while other indexes managed a 14.8 percent gain. In 2000, Australian stocks were apparently spared a greater knockdown as the Sydney Olympic Games limited the S&P ASX 200’s drop to 5.5 percent, while the other major indexes fell 17.4 percent.
Greece could also use another Olympic hosting about now after the 2004 games in Athens sent the FTSE/ATHEX 20 up 44.8 percent over six months while the other indexes averaged a 7.5 percent gain. Finally, the Shanghai SE 180 fell only 12 percent in the six months after the 2008 Beijing games, far better than the average drop of 38.1 percent.
‘Let’s hope the London markets get a boost to match what has happened after previous Olympic Games,’ says Ferguson, adding that the study’s results aren’t all that surprising. ‘Deloitte’s analysis of the outperformance of host country stock exchanges is broadly in line with previous behavioral finance studies, which have indicated that major sporting events have a discernible impact on market sentiment.’
