Abstract
M.Com. (Financial Economics)
The main concern of this study was to evaluate whether an announcement to host
major international sporting tournaments in South Africa is perceived by stock market
investors to be associated with net economic benefits for the domestic stock market.
If the economic activities associated with a tournament are perceived to be beneficial
stock prices should react positively and if such activities are perceived to be bad then
prices should react negatively; else there should be no reaction if such
announcement conveys no relevant investment information for the stock market. The
study applied an event study methodology to analyse the daily historical log returns
of the Johannesburg Securities Exchange (JSE) All Share Index (ALSI). It uses bidwinning
announcements that South Africa would host three major international
sporting tournaments, namely, the 1995 Rugby World Cup, 2003 Cricket World Cup,
and 2010 Soccer World Cup. Event windows of 41 days, inclusive of announcement
dates, are used to observe price reactions. The estimation samples consisted of 250
daily returns in the pre-event window period. Overall, the results showed that in
South Africa all announcements led to a positive price reaction. Thus, the
announcements for South Africa to be hosting these tournaments conveyed useful
positive information to investors in the JSE.