The London 2012 Olympic Games announcement and its effect on the London Stock Exchange

Abstract

Purpose

The purpose of this paper is to investigate the reaction of the London Stock Exchange to the announcement of the city hosting 2012 Summer Olympic Games. The expectations of the Olympic Games are the anticipation of massive economic boosts to the host cities. These expectations are presumed to be translated into positive stock price returns. This research examines the London Stock Exchange industrial indices reactions to this announcement in July 2005.

Design/methodology/approach

In order to evaluate the returns the paper employs simple conventional OLS methodology technique, event study methodology and GARCH models with appropriate dummy variables.

Findings

The empirical results indicate a very limited number of significant indices impacted by such an announcement. A consistent finding to all the alternative estimations is that the oil and gas industry seem to be negatively affected by the Olympic Games announcement.

Practical implications

Findings are strongly recommended to practitioners, financial investors and portfolio managers dealing with British Stocks.

Originality/value

The contribution of this paper is that findings are in contrast to relevant studies, like Athens' Olympic Games, since enthusiasm is diminished.

Citation

Asteriou, D., Samitas, A. and Kenourgios, D. (2013), "The London 2012 Olympic Games announcement and its effect on the London Stock Exchange", Journal of Economic Studies, Vol. 40 No. 2, pp. 203-221. https://doi.org/10.1108/01443581311283673