The real estate bubble on the Warsaw Stock Exchange: the effect of UEFA Euro 2012

The real estate market is functioning as a system against a background of business, social, legal and political environments. Connections between different spheres of investor activity are also visible in subsystems of the real estate system – management, turnover, investment and financing. World events, such as the Union of European Football Associations (UEFA) Championships, are closely tied with the arrangement of proper infrastructure for their service. Therefore they influence local real estate markets, especially in the segment of service for huge numbers of fans (the development of accommodation and gastronomic facilities) and sporting events (recreation and sporting facilities). The new investment anticipates the big sporting event for a few years.

Football (called soccer in the United States) is one of the most popular sports disciplines in the world. Millions of fans all over the world are focused on football matches during the UEFA and Fédération Internationale de Football Association (FIFA) Championships (average 150 million of people are watching every match). The most valuable players are employed in European clubs and international advertising companies. The organization of such a big event as the UEFA Cup is challenging for the organizing country (the infrastructure project alone of UEFA EURO 2012 in Poland was estimated at 16 million USD).

The research will focus on the activities of investors engaged in the building and construction branch on the Warsaw Stock Exchange (WSE) in 2005-2014. Detecting the speculative bubble existing on the WSE during this period will be the goal of the article.

The analysis will based on different econometric and statistical tools. We will try to explain the logarithmic rates of return of stocks listed on WSE using multiple regression models with variables describing the financial standing of companies or with the dummy variables representing events influencing the irrational behavior of investors. The process of estimating model parameters will be based on classical ordinary least squares, generalized least squares, or maximum likelihood methods. Our hypothesis about the existing “speculation bubble” on the WSE will be verified by statistical tests.

We expect that the bubble effect on the real estate market in the WSE during the analyzed period existed. We suppose that the decision of UEFA to give the rights to organize the UEFA CUP 2012 in Poland and Ukraine had a strong influence on the proper valuation of stock prices quoted on the WSE from the building and construction branch.