Olympic Games and the stockmarket

Does analysis of the historic behaviour of stock markets around the time of the four-yearly Olympic Games have anything of interest for investors?

The Olympic Games are a major event, often requiring much spending to improve infrastructure; and such spending can provide a fillip to a nation’s economy. If this affects prices on the stock market it is likely to happen soon after the initial announcement of a country winning the competition to host the event – so, long before the Olympics actually take place. The hosts for the Olympic Games are usually announced seven years in advance.

However, in this analysis we will look at the performance of host country stock markets in the year of the Olympics itself.

The following chart shows the performance of stock markets in countries that have recently hosted the Olympics: US (1984, 1996), Australia (2000), Greece (2004), UK (2012). (NB. China was omitted as it hosted the Games in 2008 – a year when stock markets had their focus on other matters; the share price of National Bank of Greece was used as a proxy for the Greek stock market.). The index data has been re-based to start at 100. The Games generally take place in August-September (indicated by the shaded portion in the chart).

Stock market performance of Olympics hosts

There are no easily discernible general trends from the above chart.

To analyse this in some more detail, the following chart plots the average performance for all the markets over three periods:

1         Before games: from 1 January to the start of the games

2         During games: the two-three week period of the games

3         After games: from the end of the games to 31 December

The darker bars show the average performance calculated excluding China and Greece.

Average performance in year of OlympicsGenerally, equities in host country markets appear to be weak in the months leading up to the games, perhaps when the media runs stories of cost overruns and missed timetables. And then there appears to be a relief rally afterwards.


A recent academic paper analysed the performance of stocks for two hosting countries: China in 2008 and the UK in 2012. The paper summarised its findings as-

Olympic “euphoria” is sufficient in both China and the UK to influence stock returns and valuations but the overall fundamental benefits of the Olympics are small.

This article is an extract from The UK Stock Market Almanac 2016.

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Stocks with the worst recent annual performance

The following table shows the 13 FTSE All-Share stocks that have had the highest number of consecutive negative annual returns to end 2014. The last column gives the number of years of consecutive negative returns.

For example, First Group has not had an up year since 2007, and so has had seven consecutive years of negative returns up to 2014.

Company TIDM Index Consec -ve Yrs
FirstGroup FGP FTSE Mid 250 7
Tesco TSCO FTSE 100 5
Aquarius Platinum Ltd AQP FTSE Small Cap 5
Hardy Oil & Gas HDY FTSE Small Cap 5
BlackRock Latin American Investment Trust BRLA FTSE Small Cap 4
Anglo American AAL FTSE 100 4
BlackRock World Mining Trust BRWM FTSE Mid 250 4
Anglo Pacific Group APF FTSE Small Cap 4
Premier Oil PMO FTSE Mid 250 4
City Natural Resources High Yield Trust CYN FTSE Small Cap 4
BlackRock Commodities Income Investment Trust BRCI FTSE Small Cap 4
Ferrexpo FXPO FTSE Small Cap 4
Hansard Global HSD FTSE Small Cap 4


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Stocks with the best recent annual performance

The following table shows the seven FTSE All-Share stocks that have had the highest number of consecutive positive annual returns to end 2014. The last column gives the number of years of consecutive positive returns.

For example, Dechra Pharmaceuticals has not had a down year since 2003, and so has had 12 consecutive years of positive returns up to 2014.

Company TIDM Index Consec +ve Yrs
Dechra Pharmaceuticals DPH FTSE Mid 250 12
Compass Group CPG FTSE 100 9
Worldwide Healthcare Trust WWH FTSE Mid 250 8
Booker Group BOK FTSE Mid 250 8
Barr (A G) BAG FTSE Mid 250 7
Biotech Growth Trust (The) BIOG FTSE Small Cap 7
BTG BTG FTSE Mid 250 7

After these seven stocks, there have been 34 FTSE All-Share stocks that have had positive annual returns for the past six years.

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2013 market review – international markets

Equity and commodity markets

The following chart shows the returns on a range of international stock markets and commodities in 2013.

International markets returns 2013

A few notes-

  1. Japan was easily the strongest market in this selection in 2013 (+56.7%)
  2. The FTSE 100 was the weakest of the G7 markets here.
  3. Not a good year for the BRICS.

Currency markets

The following chart shows a sample of currency moves against the British pound in the year. For example, the British pound increased 25.4% against the South African Rand, and fell in value 2.1% against the Euro.

Pound sterling performance 2013Equity and commodity markets (sterling)

The following chart shows the returns on the same range of markets shown in the first chart, but this time in sterling terms (i.e. showing the currency-adjusted returns for a UK investor). The order of the markets has been kept the same as in the first chart.

International markets returns 2013 (GBP)Some notes-

  1. UK investors would have seen a return in the Nikkei 225 of 26.6% (down from 56.7% after adjusting for the large fall in the yen against sterling).
  2. The strongest sterling-adjusted market in 2013 in this selection was Nasdaq (+35.7%).
  3. The second strongest market was the FTSE 250.
  4. In domestic currency terms the Australian market rose 15.1% in 2013, but UK investors would have experienced a loss of 3.1% in this market as sterling increased 18.8% against the Aussie dollar.
  5. Except for China, the losses in the BRIC markets were exacerbated by the strength of sterling against their currencies. For example, a domestic currency loss of 15.5% in the Brazilian market became a 28.0% loss for UK investors in that market…
  6. …and the same for gold and silver as sterling appreciated against the US dollar in the year.

(Similar analysis for 2012, 1H 2013.)


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2013 market review – comparative performance of FTSE 350 sectors

The following chart shows the performance of the FTSE 350 stock sectors in 2013.

FTSE 350 sector returns in 201326 of the 38 sectors out-performed the FTSE 100 Index in the year, with 24 sectors increasing over 20%. Only three sectors saw negative returns in 2013.

The data for the above chart are given in the following table.

FTSE 350 Sector TIDM Rtn 2013 (%)
Automobiles & Parts 63.2
Fixed Line Telecommunications 61.8
Forestry & Paper 56.2
Mobile Telecommunications 52.7
Financial Services 42.3
Real Estate Investment & Services 41.4
Travel & Leisure 38.1
Aerospace & Defense 37.6
Life Insurance 36.0
Household Goods 35.1
Technology Hardware & Equipment 35.1
Media 34.9
General Industrials 33.9
General Retailers 32.6
Industrial Transportation 30.7
Industrial Engineering 27.5
Support Services 26.6
Personal Goods 26.2
Software & Computer Services 25.6
Health Care Equipment & Services 25.0
Pharmaceuticals & Biotechnology 24.8
Construction & Materials 23.4
Chemicals 21.5
Electronic & Electrical Equipment 21.3
Real Estate Investment Trusts 15.1
Equity Investment Instruments 14.6
FTSE 100 14.4
Food Producers 13.7
Beverages 11.7
Nonlife Insurance 11.4
Oil & Gas Producers 8.1
Gas, Water & Multiutilities 8.0
Banks 7.8
Food & Drug Retailers 6.5
Electricity 3.6
Tobacco 2.3
Oil Equipment, Services & Distribution -6.3
Mining -16.4
Industrial Metals -48.6

Performance of UK sectors in 2012


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2013 market review – comparative performance of UK equity indices

The following chart shows the performance of the main UK stock market indices in 2013.

UK markets annual returns 2013As can be seen, the FTSE 100 Index had the lowest returns of the indices. The strongest performance was from small and mid cap indices.

The data for the above chart is shown in the following table.

Index 2013 Rtn(%)
FTSE Fledgling 35.8
FTSE TechMARK All Share 31.9
FTSE SmallCap 29.6
FTSE 250 28.8
FTSE AIM 100 22.6
FTSE All-Share – Total Return 20.8
FTSE AIM All-Share 20.3
FTSE 100 Index – Total Return 18.7
FTSE4Good UK 18.4
FTSE UK Dividend Plus 18.3
FTSE All-Share 16.7
FTSE 350 16.4
FTSE4Good UK 50 15.9
FTSE 100 14.4




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World markets performance in January 2013

The following chart shows the performance of a selection of world markets in January 2013. The FTSE 100 and FTSE 250 Indices were up 6.4% and 5.3% respectively.



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The January Effect(s)

It’s January, so let’s talk about the January Effect.

But which January Effect would that be?

We’ve come across three different uses of the term. A quick overview follows.

1. Small-caps out-perform large caps in January

The most common use of the term January Effect describes the tendency of small-cap stocks to out-perform large-cap stocks in January.

In 1976 an academic paper found that equally weighted indices of all the stocks on the NYSE had significantly higher returns in January than in the other 11 months during 1904-1974. This indicated that small capitalisation stocks out-performed larger stocks in January. Over the following years many further papers were written confirming this finding. In 2006 a paper tested this effect on data from 1802 and found the effect was consistent up to the present time.

The UK market experiences the same January Effect as seen in the US market. The small cap out-performance in January is significantly strong: the FTSE Small Cap Index has out-performed the FTSE 100 Index by an average 3.7 percentage points in all Januaries since year 2000. And the small cap index has under-performed the FTSE 100 Index in just one year in the past 13.

The following chart shows the average FTSE Small Cap Index out-performace of the FTSE 100 Index for each month since 2000.

2. January predicts the market for rest of the year

Historically, the returns in January have signaled the returns for the rest of the year. If January market returns are positive, then returns for the whole year have tended to be positive (and vice versa).

This is sometimes called the other January effect, or January Predictor or January Barometer and was first mentioned by Yale Hirsch of the Stock Traders Almanac in 1972. A variant of this effect has it that returns for the whole year can be predicted by the direction of the market in just the first five days of the year.

Academic research has largely found that January returns can predict the rest of the year, but there is some doubt as to whether the effect can be exploited.

And Dan Greenhaus of BTIG points out that January is not necessarily any better a predictor of full year performance than any other month. According to him,

When February is down, the 12 month return inclusive of that February is 2.0%. When February is up, the S&P 500 returns 12.53%

and similar for the other months.

3. The market tends to rise in January

In 1942 Sidney B. Wachtel wrote a paper, “Certain Observations on Seasonal Movements in Stock Prices”, in which he proposed that stocks rose in January as investors began buying again after the year-end tax-induced sell-off.

Looking at the returns for the FTSE 100 Index since 1984, it is true that they tend to be positive – but not strongly so. The index has risen in 57% of all Januaries since 1984 with an average increase of 0.3% – which ranks it in eighth place of the 12 months.


Other papers:


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