Stock Market Reaction to Mega-Sport Events: Evidence from South Africa and Morocco

Thabo J. Gopane and Reggy M. Mmotla

This paper investigates the domestic stock market reaction to the announcement of South Africa winning the bid to host the 1995 Rugby World Cup, 2003 Cricket World Cup, and 2010 FIFA World Cup as well as Morocco concurrently losing the hosting competition for the 2010 FIFA World Cup. We used Event Study and EGARCH models. For Event Study, we evaluated normal market performance using 250 daily stock returns, while abnormal returns were tested within a 41-day (-20, +20) event window. The test was replicated using 2,227 daily compounded stock returns for the EGARCH model. Based on both the Event Study and EGARCH models, our findings show that the stock market responded positively to the hosting of mega-sport events for the bid winner (South Africa) and reacted negatively to the bid loser (Morocco). The results are statistically significant at conventional test levels. The findings support policy decisions that welcome mega-sport events.