The term 'Type A' Event refers to the world's biggest sporting events and include the Olympics, the World Cup & to some extent the Commonwealth Games. Spread Co has analysed the economic worth of hosting a 'Type A' event using data from over a decade of international sporting events, covering their impact on the GDP, currency, and market of host nations.
   
Economic impact

There are often concerns that stadia and venues turn into white elephants - the Manaus stadium from this year's World Cup for example is a 41,000 seated stadium, built in an area with one local team with fewer than 5,000 average spectators. Although it is common for such venues to be built and fall into disuse, the net impact on an economy shows positive trends.

Click the above table to enlarge - Table showing % change in GDP in the years before and after an event compared to the year of the event. * - No data.
Host Event Year % GDP change from
2 years before
% GDP change from
1 year before
% GDP Change
1 year after
% GDP Change
2 years after

Brazil

World Cup

2014

-

-

- -

South Africa

World Cup

2010 25.2054795 22.1917808 10.410959 4.65753425

Germany

World Cup

2006 6.07710063 4.69907328 14.507183 24.8389431

South Korea

World Cup

2002 7.8817734 12.4794745 11.822660 25.6157636

Japan

World Cup

2002 -18.839488 -4.4963577 8.088411 16.9555388

UK

Olympics

2012 6.75521976 -0.0284345 2.4575514 -

China

Olympics

2008 40.0017692 22.7276748 10.358707 31.1535229

Greece

Olympics

2004 35.9649123 15.3508772 5.2631579 14.9122807

Poland

Euro Championship

2012 4.08163265 -5.3061224 5.7142857 -

Ukraine

Euro Championship

2012 23.1638418 7.90960452 0 -

Austria

Euro Championship

2008 21.4975845 9.42028986 -7.246377 -8.6956521

Switzerland

Euro Championship

2008 22.7099237 13.9312977 -2.862595 4.77099237

Portugal

Euro Championship

2004 28.6486487 12.4324324 3.7837838 9.18918919

UK

Commonwealth

2014 - - - -

India

Commonwealth

2010 28.3523559 20.0819432 10.043898 8.79133743

Australia

Commonwealth

2006 17.9384204 7.09504685 14.323963 41.2985274

UK

Commonwealth

2002 7.85366155 8.37806157 15.682645 37.0103029

Average

17.1528558 9.79110948 6.8232161 17.5415234
Table showing % change in GDP in the years before and after an event compared to the year of the event. * - No data.
The table above shows the % change in GDP in the two years preceding and following every World Cup, Olympics, European Championship and Commonwealth Games since 2002. This is of course just one factor in GDP and events such as the 2008 banking crisis have a profound effect. Nonetheless, with that caveat in mind, the 18 countries that have hosted an event have seen an average increase of over 17% before and after the event. This suggests that, in general, these sporting events are beneficial to a host nation's economy.

The growth seen in 2013 by London after the most recent Olympics (2.5%) outstrips the global average increase in GDP for advanced economies (1.2%) and the average for the Eurozone (-0.4%).
    
Currencies
Understanding currency patterns tied to sporting events can help to determine trader predictions. First we will take a look at how the currency of a host nation is effected in the build up to an event.
  
Click the above table to enlarge - Table showing % change in strength of host currency compared to USD and GBP in the year prior to the event. * - No data.
Host Event Year 1 year before
vs. USD
6 months before
vs. USD
1 year before
vs. GBP
6 months before
vs GBP
Brazil World Cup 2014 -4.1689815 5.80457344 -12.114372 3.16027088
South Africa World Cup 2010 4.6973664 -4.7512706 14.9270483 5.27497194
Germany World Cup 2006 13.5931436 21.9379043 -1.6779337 0.31704512
South Korea World Cup 2002 0 0 2.20809391 7.67261342
Japan World Cup 2002 -4.3637279 5.27079001 -7.6138525 4.762484524
UK Olympics 2012 -3.9432236 -0.4737711 - -
China Olympics 2008 9.47187929 3.54595336 14.7013189 8.02646719
Greece Olympics 2004 8.56704114 1.1880708 -4.9200713 -1.59033999
Poland Euro Championship 2012 -26.772788 2.93663591 -19.801593 2.43537213
Ukraine Euro Championship 2012 -1.081954 -0.5086799 4.79244308 -0.55486417
Austria Euro Championship 2008 14.4552731 6.23335177 14.9120482 6.72062713
Switzerland Euro Championship 2008 14.7871833 6.29215349 17.2217471 8.87981468
Portugal Euro Championship 2004 2.82481209 -5.3522755 -6.8413872 -4.80455482
UK Commonwealth 2014 9.93919085 2.66435459 - -
India Commonwealth 2010 6.87361419 0.39911308 7.55808093 -3.45363305
Australia Commonwealth 2006 -6.9738126 -1.9640534 2.38379784 -0.54599
UK Commonwealth 2002 9.6598812 9.91907953 - -
Average 2.7979351 3.1259958 1.83824063 2.592877499
Table showing % change in strength of host currency compared to USD and GBP in the year prior to the event. * - No data.
On average the value of currency increases against both the dollar and pound in the year before the host's event. Proportionally, the majority of this increase occurs in the 6 months before the event's start date, so there is little to be gained from investing earlier. The average cost of a host nations currency in pounds over the twelve month build up to a tournament is volatile until the six or seven months to go point, at which a steady rise beings.

Graph showing strength of individual host nation currency against GBP in the 12 months prior to the event.

Graph showing the average strength of host nation currency against GBP in the 12 months prior to the event.

   
This top level look at currency values prior to a major sporting event, again, does not account for an array of other factors, but does indicate a trend.

     
Markets

Two key milestones affect the market of a host nation, the announcement of the country hosting and the event itself. Cheng Fan Fah and Hwa Tee Hai from the University Putra Malaysia have previously studied the impact of international sporting events on markets by analysing the cumulative average abnormal returns (CAAR) in the days preceding and following both the announcement and hosting of an event.

   
Source: Impact of mega sport events on hosting countries’ stock market, 2014, Cheng Fan Fah and Hwa Tee Hai.
   
Here we have a graph showing the 30 days prior to and post the event announcement day. Immediately following the announcement there is a noticeable increase in CAAR growth over the next 30 days (2.07%).
   
Source: Impact of mega sport events on hosting countries’ stock market, 2014, Cheng Fan Fah and Hwa Tee Hai.
    
There is less of a recognisable pattern in the 32 days building up to and in aftermath of an event actually taking place. Fluctuation during this 72 day period makes it a potentially tricky time to predict. There is substantial impact caused by international sporting events on various aspects of a host nation’s economy that could present opportunities to traders, with a generally positive trend over the variables analysed here. However, this study does ignore other external factors that could influence markets, currencies and economies.
    
Disclaimer: Spread Co is an execution only service provider. The material on this page is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by Spread Co Ltd or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
 
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