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Olympic Games start in a week

Here’s what the stock market does
during the summer Olympic Games

Factset’s Andrew Birstingl found the Dow Jones Industrial Average (^DJI) has actually risen during 69% of Summer Olympics. Including the years the Dow Jones was negative during the Summer Olympics, the average gain for the Dow has been an astounding 3.9%.

However, this data includes five of the Summer Olympics games that lasted more than two weeks, with a couple lasting nearly six months. Birstingl stripped out these outliers, and calculated the Dow Jones has increased by 1.8% during the 21 two-week-long Summer Olympic games.

In total, 67%, or 14 out of 21, of these two-week long games have seen a positive return for the Dow.

This ratio slips a bit, once you look at the one-year return on the Dow. The Dow Jones was only in the green for 12 of 21 (57%) of the two-week-long Summer Olympics games. Lower for sure, but still more than 50% of the time.

This is certainly an interesting trend, but may be of more interest to traders than long-term investors. After all, correlation doesn’t necessarily imply causation, and it’s not clear whether there’s an explanation for this trend.

“It’s difficult to point to any one reason for the Dow gaining in value during 69% of the Summer Olympic Games since there are so many different factors that could drive prices up or down at a point in time,” Birstingl told Yahoo Finance.

It might be more interesting to take a look at how the four Olympics sponsors (since 2000) — Samsung, McDonald’s (MCD), Panasonic (PCRFY) and Coca-Cola (KO) — generally perform, during and after the Summer Olympics. These have a more direct connection to the Summer Olympics, as the exposure these companies get could stimulate sales.

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On average, all four companies outperform the MSCI world market index during the Summer Olympics. Only Coca Cola underperforms this index when you look at the one-year returns.

And so it seems the Summer Olympics are not only an important time for sports fans, but for stock market participants as well. Of course, past performance is no promise of future results.