Sport and emerging capital markets: market reaction to the 2022 World Cup announcement

Abstract

PurposeThe purpose of this paper is to examine how the announcement of the mega sport event of the 2022 FIFA World Cup affected the stock market return and volatility for the hosting country (Qatar) and other economically related countries (United Arab of Emirates, Bahrain, Kuwait, Saudi Arabia and Oman).Design/methodology/approachThe paper includes empirical analysis in which data from the Qatar Stock Market as well as a sample of economically connected markets are collected for the period of 2010 and 2011 and analyzed to examine if mega sport events influence stock market return and volatility. Two testing methodologies are used in this study, event study as well as GARCH and EGARCH models. Additionally, sector effect is considered to examine if mega events can affect sectors' returns in different levels.FindingsThe study found evidence of abnormal market return in the hosting country; in particular, the service sector is the most affected sector. However, it failed to find any evidence of abnormal return for the rest of selected Gulf Cooperation Council (GCC) countries. On the other hand, no significant volatility effects were found.Originality/valueThis paper's originality lies in suggesting that policy makers in small economies expecting to host mega events need to work more seriously to promote investments and attract funds from investors and consumers to be able to reap the benefits out of these events – which should exceed the pay associated with improving the infrastructure of less developed markets. Given that Qatar, as well as most of the GCC countries, is planning to diversify their future income, sport may improve the country's reputation and attract external investments to the country.