The 2004 Olympic Games announcement and its effect on the Athens and Milan stock exchanges

Abstract

Through an event study methodology, the effect of the nomination of Athens as the hosting city for the Olympics of 2004 on the stock exchanges of Greece (winner) and Italy (loser), the two primary candidates for the Games is examined. Academic literature suggests that sporting mega events have a positive contribution to the host area economy. This implies that the stock exchange should react positively to the announcement of such events. Berman et al. (2000), in a similar study on the announcement of the Sydney 2000 Olympics, found no significant effect on the overall market and only limited effect on infrastructure-related companies based in the specific area hosting the Games. This study reveals a significantly positive effect on the Athens Stock Exchange (ASE) as a whole, as well as on infrastructure-related industries. No significant effect was identified on the Milan Stock Exchange (MSE). The differences in the impact of the announcement to economy size differences between the two countries and to the assessment is attributed to the fact that due to the highly competitive nature of the bidding process the financial markets assign higher probability to losing instead of winning.

Market impact of international sporting and cultural events

“…The increased exposure to international media may also produce long-term benefits through increased tourism receipts in the years after the event. Veraros et al (2004) examine the effect of the announcement of the hosting city for the 2004 Olympic games on the stock exchanges of Greece and Italy and find a significant positive effect on the Athens Stock Exchange.…”

“…Further we also take into account the country bidding record. The motivation for including this piece of information is grounded on the idea that the selection outcome is influenced by the lobbying power of the candidacies (Veraros et al 2004): if the country did bid for hosting the last event and lost, investors may perceive that the lobbying power is limited and anticipate that, once again the candidacy will not succeed.…”

Olympic news and attitudes towards the Olympics: a compositional time-series analysis of how sentiment is affected by events

“…For example, hosting such events, or success in them, appears to influence optimism in stock markets [2,17,28,30,42] and subjective well-being [29,40].…”

Stock market reactions to entry mode choices of multinational hotel firms

“…As suggested by Berman et al (2000) and Veraros et al (2004), abnormal returns may exhibit cross-sectional dependence. When such dependence is suspected, Peterson (1989) advocated the standardization of the abnormal returns.…”