Will a "Fun" Stock Index of Olympic Partners Turn Serious?

By Michael Gelb

Designed as a "fun" way to let sports fans track the stocks of businesses sponsoring the Olympic Games in Beijing, a new Dow Jones index is now watched to see if controversy surrounding the games affects corporate fortunes.

John Prestbo, editor and executive director of Dow Jones indexes, says his team created the new "Dow Jones 2008 summer games index" because "people like to make connections between their interests in life." But Dow Jones also said it has licensed the index to at least one investment firm.

Dow Jones publishes some of the investment world's most closely watched indexes of stock market performance. It has an inventory of more than 130,000 indexes, tracks shares in 61 countries and, according to Prestbo, produces a new index every week. The company's best-known index is the Dow Jones industrial average, which appears daily on virtually every American financial page as a snapshot of performance by the U.S. stock exchanges.

The summer games index consists of all 37 of the publicly traded companies that have signed on as official Olympic sponsors or partners. The index includes such well-known and giant companies as Microsoft Corporation, General Electric Company, McDonald's Corporation, Matsushita Electric Industrial Company, Volkswagen Group, Adidas Group and Samsung Electronics Company, as well as the Bank of China and a number of relatively small Chinese companies.

Dow Jones has previously created a football index for publicly traded soccer teams and a Grand Prix index that tracks the performance of Formula One auto racing-related companies - including engine manufacturers, tire suppliers, oil/fuel sponsors and team sponsors. Dow Jones plans to create an index for the 2010 Winter Olympics.

The company is continually looking for ways to serve investors with indexes that measure performance in various market sectors and by investment objective. For example, the company has developed more than 70 Islamic indexes to help individuals invest in accord with Islam's Shariah laws.

Michael Goldstein, a professor of finance at Babson College in Massachusetts, said the wide variety of indexes serves investors who want to invest in certain market sectors. He notes that investment managers assemble portfolios that mirror the indexes.

Goldstein is uncertain about the value of the Olympic Games index to investors. But he said the index could attract more attention if public protests over Chinese government policies toward Tibet and more general allegations about government repression continue to attract attention or prompt a boycott.

"The Olympic index will languish in obscurity unless the United States were to pull out of the games," he said.

Goldstein said continuing controversy could spill over onto Olympic sponsors, and that journalists might then turn to the Dow Jones summer games index as a way to quantify the damage. An American boycott seems unlikely, however, as President Bush is sticking with his plans to attend the opening ceremony in Beijing.

Kevin Hassett, an economist at the American Enterprise Institute who has published two books about stock market performance, questioned the substantive value of the new index, but noted that political controversy could turn the games from a public relations bonanza to a public relations problem for sponsor companies.

"Historically, there's been nothing better for businesses than association with the Olympic Games, but there is absolutely a risk with the Beijing games," Hassett observed.

Hassett said businesses often have tried to piggyback on the popularity of sports. He pointed to Wheaties cereal, which calls itself the "Breakfast of Champions" and has been putting pictures of Olympic medalists and other athletes on its cereal box for more than 70 years.

But he also observed that athletes sometimes draw unwanted attention to their sponsors. In recent years, former Olympic medalist Marion Jones, U.S. basketball player Kobe Bryant and U.S. football star Michael Vick have been involved in high-profile legal battles that have created headaches for sponsors. Jones and Vick are now in jail.

David Carter, executive director of the Sports Business Institute at the University of Southern California, said companies can protect themselves from the controversy surrounding the Beijing games by drawing a distinction between backing athletic competition and endorsing the policies of the host government.

But he added that companies that mishandle the public relations challenge "could easily be viewed as callous or otherwise out of touch."

Carter said that measures like the Dow Jones index "are fun to follow and great conversationally," but not a true measure of the Olympics' effect on corporate performance.

"The issues impacting and moving the financial needle for companies of this size extend far beyond their Olympic participation," he said.

Source: U.S. Department of State

judythpiazza@newsblaze.com

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