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The Anticipated Sectoral Adjustment to the Canada-United States Free Trade Agreement: An Event Study Analysis

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  • Aileen J. Thompson
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    Abstract

    In this paper, a stock market event study is employed to investigate investors' expectations about the consequences of the Canada-U. S. Free Trade Agreement for manufacturing industries in Canada. The author finds that industry-level abnormal returns corresponding to only one event, reaching the agreement in October 1987, are jointly significant and consistent with prior hypotheses about the impact of the agreement. Although only a few of these abnormal returns are statistically significant, all of them have the anticipated signs and some are quite large, suggesting substantial profits and losses during the adjustment to free trade.

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    File URL: http://links.jstor.org/sici?sici=0008-4085%28199305%2926%3A2%3C253%3ATASATT%3E2.0.CO%3B2-6
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    Bibliographic Info

    Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

    Volume (Year): 26 (1993)
    Issue (Month): 2 (May)
    Pages: 253-71

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    Handle: RePEc:cje:issued:v:26:y:1993:i:2:p:253-71

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    Cited by:
    1. Hanson, Robert C. & Song, Moon H., 1998. "Shareholder wealth effects of free trade: U.S. and Mexican stock market response to nafta," International Review of Economics & Finance, Elsevier, Elsevier, vol. 7(2), pages 209-224.
    2. Kara M. Reynolds, 2005. "Anticipated versus Realized Benefits: Can Event Studies Be Used To Predict the Impact of New Regulations?," International Trade, EconWPA 0512005, EconWPA.
    3. Baggs, Jennifer & Brander, James A., 2005. "Liberalisation des echanges, rentabilite et levier financier," Direction des etudes analytiques : documents de recherche 2005256f, Statistics Canada, Direction des etudes analytiques.
    4. Moser, Christoph & Rose, Andrew K., 2014. "Who benefits from regional trade agreements? The view from the stock market," European Economic Review, Elsevier, Elsevier, vol. 68(C), pages 31-47.
    5. Caroline L. Freund & John McLaren, 1999. "On the dynamics of trade diversion: evidence from four trade blocs," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 637, Board of Governors of the Federal Reserve System (U.S.).
    6. Boardman, Anthony & Vertinsky, Ilan & Whistler, Diana, 1997. "Using information diffusion models to estimate the impacts of regulatory events on publicly traded firms," Journal of Public Economics, Elsevier, Elsevier, vol. 63(2), pages 283-300, January.
    7. Melitz, Marc J. & Trefler, Daniel, 2012. "Gains from Trade When Firms Matter," Scholarly Articles 10914282, Harvard University Department of Economics.
    8. Rehbein, Kathleen & Starks, Laura T., 1995. "Changes in U.S. trade policies: the wealth effects on Japanese steel firms," Japan and the World Economy, Elsevier, Elsevier, vol. 7(3), pages 309-327, September.

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