South African equity market reaction to the 2010 FIFA World CupTM announcement

Abstract

On Saturday, May 15, 2004, the world football governing body FIFA announced that the 2010 World CupTM would be held in South Africa. This would be the first time the football tournament had gone to an African nation. This study examines the South African equity market reaction tothe announcement of the 2010 FIFA World CupTM. Abnormal returns of the JSE all share index are calculated around the period of the announcement. Using standard event study methodologies, results show that pre-event abnormal returns are negative and statistically significant. Abnormalreturn in the event month, while positive, is not significant. However, there was a positive wealth effect created in the aftermath of the announcement evidenced by persistent positive post-event abnormal returns. While investors may have doubted the cost effectiveness of hosting the gamesbefore the announcement, the positive post-event abnormal returns seem to suggest a steady but incremental market reaction to a positive view of the event.