Using REIT Data to Assess the Geographic Effects of Mega-events: The Case of the 2020 Tokyo Olympics

Ogawa, Ryoh (2017): Using REIT Data to Assess the Geographic Effects of Mega-events: The Case of the 2020 Tokyo Olympics.

Abstract

This study proposes a new approach based on the capitalization hypothesis to evaluate the geographic effects of a mega-event of interest. The event study method with real estate investment trust (REIT) data allows for an estimation of abnormal returns accruing from serious announcements of hosting a mega-event (e.g. site decision); it also clarifies the relationship between the abnormal return level and the characteristics of a REIT property portfolio, such as location, which allows a prediction to assess the impacts on the value of profitable real estate properties by local areas. I present an empirical example – the 2020 Tokyo Olympic Games – and the results are as follows: (1) abnormal returns from the successful bid announcement for Japan REITs are significantly positive on average, (2) whereas the extent decreases as the distance from Tokyo increases, the properties used for hotels and commercial facilities are relatively susceptible to impacts even in areas far from Tokyo and (3) the prediction shows that the announcement increases the asset amount of income-producing real estate in Tokyo-to by 4.7%, corresponding to JPY 3.3 trillion or only 60% of that throughout Japan.

• Item Type: MPRA Paper
• Language: English
• Keywords: mega-events; Olympic games; geographic effects; real estate investment trust; event study method
• Subjects: G - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency ; Event Studies ; Insider Trading; L - Industrial Organization > L8 - Industry Studies: Services > L83 - Sports ; Gambling ; Restaurants ; Recreation ; Tourism; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R3 - Real Estate Markets, Spatial Production Analysis, and Firm Location > R30 - General; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R5 - Regional Government Analysis > R53 - Public Facility Location Analysis ; Public Investment and Capital Stock

References

Ahlfeldt, G. M., & Maennig, W. (2010). Impact of sports arenas on land values: evidence from Berlin. Annals of Regional Science, 44(2), 205–227.

Baade, R. A., & Matheson, V. A. (2016). Going for the gold: The economics of the Olympics. Journal of Economic Perspectives, 30(2), 201–218.

Berman, G., Brooks, R., & Davidson, S. (2000). The Sydney Olympic games announcement and Australian stock market reaction. Applied Economics Letters, 7(12), 781–784.

Boehmer, E., Musumeci, J., & A. B. Poulsen. (1991). Event study methodology under conditions of event induced variance. Journal of Financial Economics, 30(2), 253–72.

Bredin, D., O’Reilly, G., & Stevenson, S. (2007). Monetary shocks and REIT returns. Journal of Real Estate Finance and Economics, 35(3), 315–331.

Brückner, M., & Pappa, E. (2015). News shocks in the data: Olympic games and their macroeconomic effects. Journal of Money, Credit and Banking, 47(7), 1339–1367.

Feddersen, A., Grötzinger, A. L., & Maennig, W. (2009). Investment in stadia and regional economic development—Evidence from FIFA World Cup 2006. International Journal of Sport Finance, 4(4), 221–239.

Feddersen, A., & Maennig, W. (2012). Sectoral labour market effects of the 2006 FIFA World Cup. Labor Economics, 19(6), 860–869.

Glascock, J. L., & Lu-Andrews, R. (2015). The price behavior of REITs surrounding extreme market-related events. Journal of Real Estate Finance and Economics, 51(4), 441–479.

Hagn, F., & Maennig, W. (2008). Employment effects of the Football World Cup 1974 in Germany. Labour Economics, 15(5), 1062–1075.

Hagn, F., & Maennig, W. (2009). Large sport events and unemployment: The case of the 2006 soccer World Cup in Germany. Applied Economics, 41(25), 3295–3302.

Howe, J. S., & Jain, R. (2004). The REIT Modernization Act of 1999. Journal of Real Estate Finance and Economics, 28(4), 369–388.

Jasmand, S., & Maennig, W. (2008). Regional income and employment effects of the 1972 Munich summer Olympic games. Regional Studies, 42(7), 991–1002.

Kavetsos, G. (2012). The impact of the London Olympics announcement on property prices. Urban Studies, 49(7), 1453–1470.

Kolari, J. W., & Pynnönen, S. (2010). Event study testing with cross-sectional correlation of abnormal returns. Review of Financial Studies, 23(11), 3996–4025.

Langer, V. C. E., Maennig, W., & Richter, F. (2017). The Olympic games as a news shock: Macroeconomic implications. Journal of Sports Economics, forthcoming: DOI: 10.1177/1527002517690788.

Leeds, M., Mirikitani, J. M., & Tang, D. (2009). Rational exuberance? An event analysis of the 2008 Olympics announcement. International Journal of Sport Finance, 4(1), 5–15.

MacKinlay, A. C. (1997). Event studies in economics and finance. Journal of Economic Literature, 35(1), 13–39.

Maennig, W. (2017). Major sports events: Economic impact. Hamburg Contemporary Economic Discussions No. 58 (Working Papers from Chair for Economic Policy, University of Hamburg).

Maennig, W., & Richter, F. (2012). Exports and Olympic games: Is there a signal effect? Journal of Sports Economics, 13(6), 635–641.

Mirman, M., & Sharma, R. (2010). Stock market reaction to Olympic games announcement. Applied Economics Letters, 17(5), 463–466.

Mitchell, H., & Stewart, M. F. (2015). What should you pay to host a party? An economic analysis of hosting sports mega-events. Applied Economics, 47(15), 1550–1561.

Miyakoshi, T., Shimada, J., & Li, K. (2016). The impacts of the 2008 and 2011 crises on the Japan REIT market. Journal of the Japanese and International Economies, 41, 30–40.

Miyoshi, K., & Sasaki, M. (2016). The long-term impacts of the 1998 Nagano winter Olympic games on economic and labor market outcomes. Asian Economic Policy Review, 11(1), 43–65.

Rose, A. K., & Spiegel, M. M. (2011). The Olympic effect. Economic Journal, 121(553), 652–677.

Samitas, A., Kenourgios, D., & Zounis, P. (2008). Athens’ Olympic games 2004 impact on sponsors’ stock returns. Applied Economics Letters, 18(19), 1569–1580.

Scherer, R., and Strauf, S. 2003 “How to Measure the Economic Impacts of Mega-events – the Example of the World Economic Forum in Davos.” 43rd Congress of the European Regional Science Association: “Peripheries, Centres, and Spatial Development in the New Europe”, 27th–30th August 2003, Jyväskylä, Finland, European Regional Science Association (ERSA), Louvain-la-Neuve.

Sullivan, C., & Leeds, M. A. (2016). Will the games pay? An event analysis of the 2020 summer Olympics announcement on stock markets in Japan, Spain, and Turkey. Applied Economics Letters, 23(12), 880–883.

Tang, C. K, Mori, M., Ong, S. E., & Ooi, J. T. L. (2016). Debt raising and refinancing by Japanese REITs: Information content in a credit crunch. Journal of Real Estate Finance and Economics, 53(2), 141–161.

Tu, C. C. (2005). How does a new sports stadium affect housing values? The case of Fedex Field. Land Economics, 81(3), 379–395.

Veraros, N., Kasimati, E., & Dawson, P. (2004). The 2004 Olympic games announcement and its effect on the Athens and Milan stock exchanges. Applied Economics Letters, 11(12), 749–753.