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common, simple method, widely accepted and fre-
quently used by researchers to analyze the relation-
ship between the effect of a specific event and the
market return of a firm or stock market (Brown &
Warner, 1985). In general, this event study approach
allows the investigation of the stock prices behav-
ior or stock index adjacent to the events and it uses
the changes in stock prices or stock index to esti-
mate the effect of an event.
Further, the Market Efficiency Hypothesis
(EMH; Fama, Fisher, Jensen & Roll, 1969) test was
explored. The hypothesis states that the stock prices
on financial market are rapidly and fully reflective to
all new available information. Hence, investor can-
not make excess return based on the available infor-
mation they have obtained because when the market
is efficient, the stocks are traded at fair and reason-
able prices. When the financial market is under equi-
librium, investor cannot outperform the market.
The market efficiency test was used to assess
the stock market reaction to the relevant informa-
tion such as events announcement date and events
starting month related to the international sport-
ing events. The following are the systematic struc-
ture for this event study.
In this time line, t = 0 represents the event date,
t = −48
days
to t = +30
days
represents the event windows
and t = −36
months
to t = −12
months
represents the estima-
tion window. The negative sign means prior to the
event date whereas positive sign after the event date.
4
RESULTS AND DISCUSSION
The following results present the cross sectional
analysis for the all the stock market's reaction of
30 international sporting events hosting countries
and are measured by events hosting country's stock
indices to the related information such as events
announcement date and events starting month.
4.1
Cumulative average abnormal return on
events announcement date
Figure 2 shows the Cumulative Average Abnor-
mal Return (CAAR) across all stock markets
of Summer Olympics Games hosting countries.
The CAAR trend shows positive return within
range of +.23 percent to +2.05 percent prior to
the event announcement date. The lowest CAAR
is +2.05 percent which is 5 days prior to the event
announcement date. However, the CAAR trend
shows sharp increase of 1.31 percent from 1.37
percent at event date to 2.68 percent in the follow-
ing day and continues to increase up to maximum
return of 2.97 percent from 1.37 percent at event
date to 4.34 percent at day 26 and increase of 2.34
percent from event date till day 30.
Figure 3 shows the CAAR across all stock mar-
kets of Winters Olympics Games hosting countries.
The CAAR trend shows negative return within the
range of −.69 percent to −2.86 percent from day
28 till the event announcement date. However, the
CAAR trend shows increasing trend following the
event announcement date during which the return
increased 2.69 percent from −2.29 percent at event
date up to +.40 percent at day 12. From the event
3.3
Event date
This study focused on how the event announcement
date and event starting date of an international
event affected the host country's stock market. In
the events, the announcement date or starting date
falls under non-trading day such as weekend or
public holiday, where the market is closed, the next
available trading date was defined as event date.
3.4
Estimation window and event window
Prior to obtaining data of an events hosting coun-
try stock index, it is crucial to identify the estima-
tion period and the event window to be used for this
analysis. The estimation window is a time period
prior to the event for obtaining
in the Mar-
ket Model (Sharpe, 1982) whereas the event win-
dow is the time period around the event of interest
which is used to investigate the abnormal returns.
Figure 1 shows the event study time line.
α
and
β
Figure 2. CAAR (
30) across all stock mar-
ket of Summer Olympics Games hosting coun-
tries adjacent to the events announcement date on
each of the days in the 30 days symmetric window.
Note
: The actual data can be provided upon request.
−
30,
+
Figure 1.
Event study time line.
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