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Summer Olympics Not Always Gold for Host Economy

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Summer Olympics Not Always Gold for Host Economy By Andrew Birstingl, Research Analyst, FactSet

The 2016 Summer Olympic Games in Rio de Janeiro, Brazil are just over a week away. The Olympics give athletes from across the world the opportunity to represent their countries and gain global recognition, but the event may also serve as a potential investment opportunity for investors. Here we analyze the historical performance of the Dow Jones Industrial Average, local indices of the host countries, and publicly traded sponsors in an effort to identify trading patterns during and after previous Summer Olympic Games.

Summer Olympics Host Year DJIA %  Change From
Start to End of Olympics
 DJIA % Change
1-Yr After Olympics
Paris, France 1900 5.1 5.8
St. Louis, United States 1904 41.7 23.0
London, United Kingdom 1908 18.8 19.4
Stockholm, Sweden 1912 0.2 -13.0
Antwerp, Belgium 1920 -11.6 -19.7
Paris, France 1924 8.6 37.0
Amsterdam, Netherlands 1928 -0.3 63.4
Los Angeles, United States 1932 17.1 53.0
Berlin, Germany 1936 0.5 14.2
London, United Kingdom 1948 -2.1 -0.2
Helsinki, Finland 1952 2.2 -1.3
Melbourne, Australia 1956 5.7 -9.6
Rome, Italy 1960 -3.6 16.3
Tokyo, Japan 1964 -0.1 8.5
Mexico City, Mexico 1968 1.2 -10.5
Munich, West Germany 1972 0.2 -7.3
Montreal, Canada 1976 -0.9 -9.4
Moscow, Soviet Union 1980 0.8 1.6
Los Angeles, United States 1984 9.3 7.9
Seoul, South Korea 1988 0.7 28.4
Barcelona, Spain 1992 1.4 7.3
Atlanta, United States 1996 4.7 44.3
Sydney, Australia 2000 -2.5 -17.0
Athens, Greece 2004 3.8 2.6
Beijing, China 2008 -0.9 -18.2
London, United Kingdom 2012 1.0 16.7

Dow Gains in Value During 69% of Summer Olympic Games

Looking back at each Summer Olympics since the games in 1900 in Paris, 69% (18 out of 26) of the events saw the Dow Jones Industrial Average gain in value from the start of the games through the end of the games. The average gain for the Dow was 3.9%. The biggest move from the Dow came during the St. Louis Olympics Games in 1904, when the index climbed 41.7% from July 1 to November 23. The second largest move occurred during the London Games in 1908, when the Dow jumped 18.8% over a six-month period.

Keep in mind that the duration of the early Summer Olympic Games in Paris (1900), St. Louis, London, Antwerp, and Paris (1924) extended well over the two-week period seen today. Excluding these events, 67% (14 out of the 21) of the games saw the Dow gain in value over the two weeks. The average increase for the Dow Jones Industrial Average for these 21 events was 1.8%. The Dow saw the largest gains for the games that were based in Los Angeles. During the Olympics in Los Angeles in 1932, the Dow Jones Industrial Average increased 17.1%. During the Los Angeles games in 1984, the index jumped 9.3%.

Performance of Local Index of Host Country

Investors also tend to keep a close eye on the performance of the major index in the host country during and after the games. Looking back at the each of the last eight Summer Olympics (starting with the Los Angeles Games in 1984), the local index of the host country increased in value 75% (6 out of 8) of the time through the two-week period. The only declines came from the 2000 Sydney Games, when the S&P ASX 200 lost 0.9% in value during the event, and the 2008 Beijing Games, when the SSE Composite fell 7.7% in value. The biggest positive mover came during the Los Angeles Games in 1984, when the Dow gained 9.3%. The average percentage change of the local index from the start of the event to the end of the event was 1.8%.

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This gain matched the average percentage change of the MSCI World Index during the same eight Summer Olympics and across the identical time frame. Therefore, investing in the local index at the start of the Summer Olympics and selling immediately after its completion hasn’t been a viable way to outperform the benchmark during recent Olympic Games.

Index of Host Country Outperforms Benchmark One-Year after Summer Olympics

Investing in the local index of the host country after the conclusion of the games seems to be a better investment strategy, based on recent history. Looking back at each of the past eight Summer Olympics, the average percentage change of the local index one year after the closing ceremony was 23.8%, compared to the 10.7% change of the MSCI World Index. Six out of the eight local indices outperformed the MSCI World Index a year after the closing ceremony.

The exceptions were the Dow in the 1984 Los Angeles Games and the FTSE 100 in the 2012 London Games. The top performer relative to the MSCI World Index was the SSE Composite in the 2008 Beijing Games. This index increased 24.5% a year after the event was finished, while the World index declined 18.5% (+43 percentage point difference).

Stock Performance of Worldwide Summer Olympic Partners

Since the 2000 Summer Olympic Games in Sydney, four public companies have been consistent worldwide partners of the games. These companies are Coca-Cola, McDonald’s, Panasonic, and Samsung. In the past four Summer Olympics, the stocks of each of these sponsors outperformed the MSCI World Index during the two-week duration of the games. Panasonic Corporation was the best performer, as the company’s stock beat the benchmark by 2.8 percentage points. When analyzing the performance of these worldwide partners one year after the games finished, three out of the four stocks outperformed the MSCI World Index.

Coca-Cola was the lone underperformer, as the beverage manufacturer declined 6.7% on average a year following the completion of the past four Summer Olympics, while the MSCI World Index lost only 3.1% in value on average (difference of 3.6 percentage points). Samsung Electronics was the best performer a year after the event. The stock of the electronics manufacturer beat the benchmark by 7.9 percentage points on average.

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