Having the Olympics in your backyard may not always be the economic boon it is expected to be.
Since the 1984 Los Angeles games, six out of the eight summer Olympics host countries saw an increase in value in their local stock market index during the games. However, the average increase was about 1.8%, which has been about the same as the performance of the overall MSCI World Index increase of about 2% during the same period, according to data from FactSet. Both Sydney (2000) and Beijing (2008) saw declines in their local indexes in the two weeks the Olympics were held, of about 0.9% and 7.7%, respectively. Additional factors, such as global politics, also influence the trajectory of a host country’s index during the games.
One year after the games, host countries saw much greater gains in their local indexes, with five nations outperforming the MSCI World Index — the exceptions being Los Angeles, Sydney and London, according to FactSet.
Gains can be seen as early as six months after the games, according to August 2012 research from Deloitte during the London Olympics. However, “The exchanges of the host countries are all very different so the reasons for the overperformance are complex to analyze,” wrote James Ferguson, capital markets partner at Deloitte.
Hosting the Olympics can put a massive amount of pressure on a country and its economy, says David Wallechinsky, president of the International Society of Olympic Historians. “It’s all about national self-esteem,” he says. However, many countries vie for the distinction with the hope of boosting tourism and other sources of revenue.
Thus far, Rio, which is hosting the 2016 summer games from Aug. 5 to Aug. 21, has bucked the trend of meager performance, despite Brazil’s ongoing economic and political woes. The Brazilian stock market saw significant gains this week, and analysts expect the good times to continue through the games.
In the months leading up to the Rio games, the Brazilian economy has seen its worst downturn since the Great Depression, stemming from slow growth in its gross domestic product and the suspension of President Dilma Rousseff for corruption.
Olympic sponsors are also expected to benefit during the two-week Olympic run. Since the 2000 Sydney summer games, Samsung, McDonald’s MCD, -1.43% , Panasonic and Coca-Cola KO, -0.09% have consistently outperformed the MSCI World Index in those two weeks, according to FactSet.
Despite the optimism for Brazil’s market, the games themselves have received less enthusiasm from fans. As of July 20, there were still 2 million tickets available for the Rio games, or about 28% of available tickets.