Faster, higher, stronger?
Faster, higher, stronger?
A look at what the Vancouver 2010 Winter Olympics may mean for the market
Markets of host countries typically have positive returns during the Games
Much has been written about the effect of mood on the market. Jason Zweig in his book on behavioural investing, Sheer nonsense? Perhaps, but we looked at all the Olympic Games of the modern era, both summer and winter, dating back to 1988—the last time Canada hosted an Olympics. A total of 12 Games in all. Sure enough, during the two-week period of the Games themselves, the market of the host country traded higher 58% of the time and had an overall average return of +0.9%. Not bad for two weeks. This time, of course, we’re the host country. Could it mean a brief rally for us as well? It did during the 1988 Calgary Games, when our market jumped +3.2% and easily outperformed the S&P 500 (+2.0%).
Your Money and Your Brain, noted that "stocks earn slightly higher returns on days when the sun is bright than on days when the sky is overcast". Similarly, Zweig also noted that outcomes of sporting events also impact the markets. Losing an important World Cup soccer match, for instance, usually means the home market of the losing team will underperform the next day. Subtly, how we feel about a sporting event influences our investing behaviour. It could also be that the good Olympic feeling (not to mention the enriched economy and international exposure) keeps the market momentum going for months afterwards. Typically, the markets of the host countries rally strongly in the 12 months after the closing ceremonies—a 14.8% gain on average (the Canadian market rallied 12.7% after Calgary). Further, the host country market performance, either positive or negative, during the two weeks of the Games tends to correspond to that market’s performance over the next 12 months 83% of the time. If you believe in spurious correlations, pay attention to what the Canadian market does during the Vancouver Games, it could have bearing on how we do for the rest of the year.
And in case you need further proof that sports can influence investor behaviour, the S&P/TSX Composite traded down the day after the Canadian men’s Olympic hockey team lost in the medal round in 2006 in Turin and the market traded up for three consecutive days following our gold medal wins for the men’s and women’s hockey teams in 2002 in Salt Lake City (+1.2%, +0.7% and +1.1%). Talk about basking in the gold-medal glow.
Market returns during past Olympic Games |
Year | Host city | Host country | Summer/winter | Dates | S&P 500 total return during Games (%) | S&P/TSX total return during Games (%) | Host country market total return during Games (%) | Host country market performance 1 year after games (%) |
2008 | Beijing | China | S | 8-24 Aug | -0.2 | 0.9 | -7.2 | 35.8 |
2006 | Turin | Italy | W | 10-26 Feb | 1.9 | 1.5 | 3.8 | 17.2 |
2004 | Athens | Greece | S | 13-29 Aug | 4.1 | 2.0 | 2.9 | 41.2 |
2002 | Salt Lake City | US | W | 8-24 Feb | -0.5 | -1.4 | -0.5 | -22.3 |
2000 | Sydney | Australia | S | 15-Sep-1 Oct | -2.0 | -6.1 | -0.5 | -2.8 |
1998 | Nagano | Japan | W | 7-22 Feb | 2.2 | 1.1 | -1.7 | -14.1 |
1996 | Atlanta | US | S | 19-Jul-4 Aug | 3.8 | 0.3 | 3.8 | 46.6 |
1994 | Lillehammer | Norway | W | 12-27 Feb | -0.8 | -0.8 | -0.1 | -3.9 |
1992 | Albertville | France | W | 8-23 Feb | 0.2 | -1.7 | 3.8 | -0.3 |
1992 | Barcelona | Spain | S | 25-Jul-9 Aug | 2.0 | 0.3 | 2.6 | 30.8 |
1988 | Calgary | Canada | W | 13-28 Feb | 2.0 | 3.2 | 3.2 | 12.7 |
1988 | Seoul | Korea | S | 17-Sep-2 Oct | 0.6 | 0.7 | 0.9 | 37.2 |
Average | 0.9 | 14.8 |
Host country benchmarks: Korea: KOSPI Index; Spain: IBEX 35; France: SBF-250 Index; Norway: Dow Jones Nordic 30 Price Index; Greece: Athens Stock Exchange General Index; US: S&P 500; Canada: S&P/TSX Composite; China: CSI 300 Index; Italy: FTSE MIB Index; Australia: ASX 200 Index; Japan: Nikkei 225 Source: HSBC, Bloomberg |
Markets of host countries typically rally strongly in the 12 months following the closing ceremonies