Assessing the economic impact of mega-events (2012)

Using event study methodologies this paper studies the stock market reaction to hosting mega sports events. By employing a dataset ranging from 1988 to 2012, this paper finds a significant stock return increase for the country that is awarded the mega-event. No significant stock price reaction is found for the countries losing the bid. The average impact on stock returns is typically large for mid cap stocks and is incurred within a day following the announcement. The magnitude of the abnormal return on the announcement day is related to the size of the tournament and the number of participating countries. Furthermore, the industries that generate significantly higher returns on the announcement day are industries that benefit fundamentally from hosting a mega-event. Generally, the economic benefit of hosting mega-events does not seem to offset the costs. The long term analysis of this paper shows that the host country’s average stock market return and its correlation with the world index change after the main mega-events are completed.