Olympics awards do not equate to market uplift: OMGI study

Investor excitement that often accompanies the award of major sporting event, such as the Olympic Games is usually misplaced, according to analysis by Old Mutual Global Investors (OMGI).

OMGI’s research (highlighted in the table blow) shows that – over the five most recent Olympiads – there is no discernible relationship between the awarding of the games to a host nation and the performance of that country’s stock market

Ian Heslop, head of global equities at OMGI argues that investors would do better to explore the potentially valuable information contained in equity markets, rather than to attempt to “forecast the unforecastable”.

Heslop points that for all their excitement, “razzmatazz, and promised social and economic benefits”, history shows that the effect of major sporting events on equity market performance is impossible to predict.

“By the end of the middle weekend of the XXXI Modern Olympiad, as a Brit, it was hard for me not to feel a tinge of pride at the collective achievements of Team GB.” said Heslop. “Hopes had been high for the team from the previous host nation, but by any measure Britain’s Olympians were delivering on their promise – big time.

‘Party pooper’

“Nobody likes a party-pooper. But setting aside the warm and fuzzy feelings the winning of medals can induce, as a fund manager I continue to believe firmly in the value of a healthy dose of cynicism to temper unbridled optimism and hyperbole.”

As the Rio Games draw to a close, although it may be some time before the true social and economic effects of the Rio Games are fully understood, Heslop is certain that Brazil’s equity market doesn’t exactly paint a rosy picture.

“Over the 2,499 days from 2 October 2009 – when it was announced that Rio had won its bid to become the host city – until the opening ceremony of the Games on 5th August 2016, Brazil’s main Bovespa stock market index lost 47.4% in US dollar terms,” he said. “This represents a 136.5% underperformance by the Brazilian equity market versus the MSCI World Index. Meanwhile, Brazil’s currency, the real, fell by 44% versus the US dollar over the same time period.”

Australia games impact

Brazil is not alone. Over the 2,549 days from the bid win on 23 September 1993 to the opening ceremony of the millennial Olympics on 15th September 2000 in Sydney, Australian equities (as measured by the benchmark S&P/ASX 200 Index) rose 49.6% in US dollar terms, underperforming the MSCI World index by 101%.

Examining the history of equity market performance for Olympic host nations over the last five Games, Hislop adds that it quickly becomes clear that there is no discernible pattern, as the following table shows:


Olympic Games host cityCountryYear of GamesDate  bid wonDate of Opening CeremonyDays from bid win to opening ceremonyPrimary equity indexEquity index % change from bid to opening ceremony in USDPerformance relative to MSCI World in USD
Rio de JaneiroBrazil201602/10/200905/08/20162,499Bovespa-47.37%-136.54%
LondonUK201207/07/200512/08/20122,593FTSE 10032.67-2.17%
BeijingChina200813/07/200108/08/20082,583Shanghai Composite61.94%12.80%
AthensGreece200405/09/199713/08/20042,534Athens Stock Exchange General Index97.87%77.42%
SydneyAustralia200023/09/199315/09/20002,549S&P/ASX 20049.57%-101.05%


“The relationship between equity market performance and the long-term economic impact (positive or negative) of hosting the Games is similarly devoid of any clear pattern,” said Heslop. “While the Greek equity market enjoyed strong outperformance of the MSCI World Index in the period between Athens’s bid win and the opening ceremony, the huge cost to the Greek economy is now widely considered to have played an important contributory role in the country’s present economic crisis.


“As we build our portfolios, the appeal of realised data – facts, as they might alternatively be called – remains enduring. We attach such great importance to statistical indicators such as changes in analyst sentiment, hard evidence of the impact of effective management teams and the emergence of potentially stable trends precisely because by doing so we negate the need to forecast the un-forecastable,” he said.

He concludes that the Olympic Games while being a “marvellous spectacle” they are a “spectacularly poor” indicator of equity market performance.

“We should enjoy them for what they are, rather than trying to construct investment portfolios in the misguided belief that it is possible to interpret how they might influence the fortunes of stock markets,” added Heslop.

Gary Robinson
Head of Video and Ezines at Open Door Media Publishing. Deputy Editor, International Investment. An experienced journalist and filmmaker with more than 20 years' financial services experience, both as journalist and originally as a fully qualified IFA, Gary works across both International Investment and InvestmentEurope titles. Previous video production credits include projects on BBC, C4 and SKY.

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