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Measuring the Effects of Regulation with Stock Price Data

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  • John J. Binder
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    Abstract

    This article examines the usefulness of stock returns in measuring the effects of regulation when the dates on which market expectations change are not known and standard sources, e.g., the Wall Street Journal, are used to choose announcement dates. Twenty major changes in regulatory constraint since 1887 are considered. Tests using either monthly or daily data are found to have surprisingly little ability to detect the effects of regulation. The evidence shows that formal regulatory announcements are generally anticipated in cases where it is unclear when expectations change.

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    Bibliographic Info

    Article provided by The RAND Corporation in its journal RAND Journal of Economics.

    Volume (Year): 16 (1985)
    Issue (Month): 2 (Summer)
    Pages: 167-183

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    Handle: RePEc:rje:randje:v:16:y:1985:i:summer:p:167-183

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    Web page: http://www.rje.org

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    Web: https://editorialexpress.com/cgi-bin/rje_online.cgi

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    Cited by:
    1. Pennathur, Anita & Smith, Deborah & Subrahmanyam, Vijaya, 2014. "The stock market impact of government interventions on financial services industry groups: Evidence from the 2007–2009 crisis," Journal of Economics and Business, Elsevier, vol. 71(C), pages 22-44.
    2. Simon H. Kwan, 2001. "Impact of deposit rate deregulation in Hong Kong on the market value of commercial banks," Working Paper Series 2001-11, Federal Reserve Bank of San Francisco.
    3. Kara M. Reynolds, 2005. "Anticipated versus Realized Benefits: Can Event Studies Be Used To Predict the Impact of New Regulations?," International Trade 0512005, EconWPA.
    4. David P. Ely & Kenneth J. Robinson, 1999. "The determinants of the wealth effects of banks' expanded securities powers," Financial Industry Studies Working Paper 99-1, Federal Reserve Bank of Dallas.
    5. Pau Castells & Francesc Trillas, 2013. "The effects of surprise political events on quoted firms: the March 2004 election in Spain," SERIEs, Spanish Economic Association, vol. 4(1), pages 83-112, March.
    6. Lopatta, Kerstin & Kaspereit, Thomas, 2014. "The cross-section of returns, benchmark model parameters, and idiosyncratic volatility of nuclear energy firms after Fukushima Daiichi," Energy Economics, Elsevier, vol. 41(C), pages 125-136.
    7. Elijah Brewer, III & Hesna Genay & William C. Hunter & George Kaufman, 1999. "Does the Japanese stock market price bank risk? evidence from financial firm failures," Working Paper Series WP-99-31, Federal Reserve Bank of Chicago.
    8. Marín Uribe, Pedro Luis & Sicotte, Richard, 2003. "Does the Separation of Regulatory Powers Reduce the Threat of Capture? Evidence from the US Maritime Bureaucracy," CEPR Discussion Papers 4093, C.E.P.R. Discussion Papers.
    9. Marín Uribe, Pedro Luis, 2001. "Exclusive Contracts and Market Power: Evidence from Ocean Shipping," CEPR Discussion Papers 2828, C.E.P.R. Discussion Papers.
    10. Robert Schweitzer, 1989. "How do stock returns react to special events?," Business Review, Federal Reserve Bank of Philadelphia, issue Jul, pages 17-29.
    11. Eckel, Catherine & Eckel, Doug & Singal, Vijay, 1997. "Privatization and efficiency: Industry effects of the sale of British Airways," Journal of Financial Economics, Elsevier, vol. 43(2), pages 275-298, February.
    12. Sherry Glied & Tama Brooks, 1997. "The Market and the Estimators: Forecasting the Cost of Medicare Catastrophic Coverage," NBER Working Papers 6287, National Bureau of Economic Research, Inc.
    13. Sanjai Bhagat & Roberta Romano, 2001. "Event Studies and the Law - Part I: Technique and Corporate Litigation," Yale School of Management Working Papers amz2475, Yale School of Management, revised 01 Jan 2002.
    14. David Ely & Kenneth Robinson, 2003. "Is the Community Reinvestment Act in Need of Further Reform? Evidence from Equity Markets during the 1995 Reform Process," Journal of Financial Services Research, Springer, vol. 23(1), pages 59-78, February.
    15. Colin Beardsley & John R. O'Brien, 2004. "Measuring the Impact of Regulationon Market Stability: Evidence from the US Markets," ICMA Centre Discussion Papers in Finance icma-dp2004-02, Henley Business School, Reading University.
    16. Christopher Knittel & Shulamit Kahn, 2002. "The Impact of the Clean Air Act Amendments of 1990 on Electric Utilitiesand Coal Mines: Evidence from the Stock Market," Working Papers 528, University of California, Davis, Department of Economics.
    17. Dumontaux, Nicolas & Pop, Adrian, 2013. "Understanding the market reaction to shockwaves: Evidence from the failure of Lehman Brothers," Journal of Financial Stability, Elsevier, vol. 9(3), pages 269-286.
    18. Sanjai Bhagat & Roberta Romano, . "Event Studies and the Law--Part I: Technique and Corporate Litigation," Yale Law School John M. Olin Center for Studies in Law, Economics, and Public Policy Working Paper Series yale_lepp-1021, Yale Law School John M. Olin Center for Studies in Law, Economics, and Public Policy.
    19. Sangkyun Park, 1998. "Why did thrift goodwill matter in 1989?," Staff Reports 51, Federal Reserve Bank of New York.
    20. Cohen, Alma & Wang, Charles C.Y., 2013. "How do staggered boards affect shareholder value? Evidence from a natural experiment," Journal of Financial Economics, Elsevier, vol. 110(3), pages 627-641.
    21. Elijah Brewer & William Jackson, 2000. "Requiem for a Market Maker: The Case of Drexel Burnham Lambert and Junk Bonds," Journal of Financial Services Research, Springer, vol. 17(3), pages 209-235, September.

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