Graduation Year

Fall 2013

Document Type

Campus Only Senior Thesis

Degree Name

Bachelor of Arts

Department

Economics

Reader 1

George Batta

Reader 2

Janet Smith

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Terms of Use for work posted in Scholarship@Claremont.

Rights Information

© 2013 Arjun Kapur

Abstract

Nations have always competed vigorously during the bidding process to host mega sporting events. The selection of the host nation is a much anticipated decision that results in the promotion of a country on a global platform. In this paper, I use a market adjusted return (index) model to conduct an event study in order to examine abnormal returns in the stock market surrounding the selection of a nation for the Summer Olympics and the FIFA World Cup. I also focus specifically on the construction and industrial sectors, as well as analyze the impact of selection on the nation emerging as the runner up in the bidding process. The research finds that the outcome of the selection process is partially anticipated by investors, resulting in a market reaction that does not accurately measure the financial impact of hosting the event. As developing nations have demonstrated an increased interest in the hosting of events over the years, this paper also addresses the resulting policy implications, as well as the opportunity cost and the economic effects of crowding out and substitution.

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