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Anticipated versus Realized Benefits: Can Event Studies Be Used To Predict the Impact of New Regulations?

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Author Info

  • Kara M. Reynolds

    (American University)

Abstract

Economists often use event study methodology to evaluate the impact of new regulations on firms before there is enough data to empirically estimate the effects. This research investigates the degree to which event study methodology can provide useful information in this regard by studying how accurately markets predict the actual benefits associated with a new law. Utilizing a unique change in U.S. trade law, I compare the benefits predicted by event study methodology with the actual benefits accruing to individual firms. The results indicate that estimates from event study methodology are poor predictors of the true effect of new policies.

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File URL: http://128.118.178.162/eps/it/papers/0512/0512005.pdf
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Bibliographic Info

Paper provided by EconWPA in its series International Trade with number 0512005.

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Length: 14 pages
Date of creation: 05 Dec 2005
Date of revision:
Handle: RePEc:wpa:wuwpit:0512005

Note: Type of Document - pdf; pages: 14
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Web page: http://128.118.178.162

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Keywords: event studies; Byrd Amendment; antidumping;

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References

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  1. Benjamin Liebman & Kara M. Olson, 2004. "The Returns from Rent-Seeking: Campaign Contributions, Firm Subsidies, and the Byrd Amendment," International Trade 0408003, EconWPA.
  2. Kara M. Olson, 2004. "Subsidizing Rent-Seeking: Antidumping Protection and the Byrd Amendment," International Trade 0407005, EconWPA.
  3. Aileen J. Thompson, 1993. "The Anticipated Sectoral Adjustment to the Canada-United States Free Trade Agreement: An Event Study Analysis," Canadian Journal of Economics, Canadian Economics Association, vol. 26(2), pages 253-71, May.
  4. Hartigan, James C & Kamma, Sreenivas & Perry, Philip R, 1989. "The Injury Determination Category and the Value of Relief from Dumping," The Review of Economics and Statistics, MIT Press, vol. 71(1), pages 183-86, February.
  5. John J. Binder, 1985. "Measuring the Effects of Regulation with Stock Price Data," RAND Journal of Economics, The RAND Corporation, vol. 16(2), pages 167-183, Summer.
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Cited by:
  1. Budzinski, Oliver, 2012. "Impact evaluation of merger control decisions," Ilmenau Economics Discussion Papers 75, Ilmenau University of Technology, Institute of Economics.
  2. Haji Ali Beigi, Maryam & Budzinski, Oliver, 2012. "On the use of event studies to evaluate economic policy decisions: A note of caution," Ilmenau Economics Discussion Papers 80, Ilmenau University of Technology, Institute of Economics.

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