Using REIT Data to Assess the Economic Worth of Mega-Events: The Case of the 2020 Tokyo Olympics

This paper proposes an alternative approach by which to evaluate the effects of hosting mega-events (e.g., the Olympics, the Football World Cup, or the World Expo). Based on the capitalization hypothesis, studies within the literature have examined whether the announcement of mega-events affects the prices of firms’ stock or real estate properties. While the use of firm-level stock prices allows us to see the effects on corporate profits, using real estate property prices more comprehensively captures the effects on domestic areas inside and outside the host city. However, since the latter approach (unlike the former approach) does not involve the use of high-frequency data, it is difficult to distinguish clearly the effects that stem from related mega-events announcements. In contrast, I use data from real estate investment trusts (REITs), whose prices have the dual features of stock and property prices. Use of the standard event study methodology while using high-frequency data allows one to estimate abnormal returns accruing from the mega-event of interest; it also clarifies the relationship between return level and the characteristics of a REIT property. I present an empirical example—the 2020 Tokyo Olympics—and the results are as follows: 1) investors assessed that the comprehensive effects would be positive, 2) the effect becomes smaller as the distance from the host city (Tokyo-to) increases; and 3) even in areas far from Tokyo-to, real estate used for hotels and commercial facilities are relatively susceptible to the effects of hosting the Olympics.