By Ben Nicholson
May 30 – Investment bank Goldman Sachs has produced a report, entitled ‘The World Cup and Economics 2014′. The report analyses the previous stock performance of host, winning, and runner-up World Cup nations, as well as providing a statistical review of each teams’ chances of progressing.
Peter Oppenheimer, Goldman Sachs’ chief global equity strategist, offers his economic analysis in a section dedicated to equity markets in relation to the performance of the nations’ team at the World Cup.
He notes: “There is a clear pattern of outperformance by the winning team in the weeks after the World Cup final. On average, the victor outperforms the global market by 3.5% in the first month.”
However, he follows up by warning that the winning nation does not hold its gains for long as the nation, “on average, sees its stock market underperform by around 4% on average over the year following the final”.
In contrast, the runner-up nation has proven to suffer in the immediate aftermath of a final defeat: “7 of the 9 other runners-up underperformed over the first month with an average underperformance of 1.4%. Interestingly, the poor performance doesn’t stop there. Most of the World Cup runners-up have seen their stock markets continue to underperform, with an average relative fall of 5.6% over the first three months.”
Oppenheimer goes on to evaluate the economic performance of host nations post World Cup. He writes: “In every case, the host country has enjoyed an outperformance of its stock market in the month after the event. The average outperformance is 2.7%, although this tends to fade fairly quickly, with nearly half underperforming over three months.”
The report predicts Brazil to win this year’s World Cup, with an impressive 48.5% rating for success, thus achieving the “ultimate goal”, which is to win and host the tournament.
However, as is ominously stated, “All the winners since 1974 (for which we have stock market data) have outperformed in the post-final month, with only one exception – Brazil in 2002!” (8) This discrepancy has greater potential to repeat than mere luck though, for the prospect of hosting the 2016 Olympic Games is sure to have an impact on the proceedings.
The 67-page document includes an interview with Franz Beckenbauer and some Brazilian stars playing for Chelsea, in conjunction with a section speculating that India probably will not qualify for a World Cup in the next 20 years.
Click here to see the full report:
http://www.goldmansachs.com/our-thinking/outlook/world-cup-and-economics-2014-folder/world-cup-economics-report.pdf
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