Anticipated versus Realized Benefits: Can Event Studies Be Used To Predict the Impact of New Regulations?
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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- Benjamin H. Liebman & Kara M. Reynolds, 2006.
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- Benjamin Liebman & Kara M. Olson, 2004. "The Returns from Rent-Seeking: Campaign Contributions, Firm Subsidies, and the Byrd Amendment," International Trade 0408003, EconWPA.
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- Reynolds, Kara M., 2006.
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Elsevier, vol. 70(2), pages 490-502, December.
- Kara M. Olson, 2004. "Subsidizing Rent-Seeking: Antidumping Protection and the Byrd Amendment," International Trade 0407005, EconWPA.
- 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.
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