Legislating stock prices

• 成果类型: Article
• 署名作者: Cohen, Lauren; Diether, Karl; Malloy, Christopher
• 署名单位: Harvard University; National Bureau of Economic Research; Brigham Young University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2013.08.012
• 发表日期: 2013
• 页码: 574-595
• 关键词: Legislator incentives; voting; Return predictability; lobbying

摘要

We demonstrate that legislation has a simple, yet previously undetected, impact on stock prices. Exploiting the voting record of legislators whose constituents are the affected industries, we show that the votes of these interested legislators capture important information seemingly ignored by the market. A long-short portfolio based on these legislators' views earns abnormal returns of over 90 basis points per month following the passage of legislation. Industries that we classify as beneficiaries of legislation experience significantly more positive earnings surprises and positive analyst revisions in the months following passage of the bill, as well as significantly higher future sales and profitability. We show that the more complex the legislation, the more difficulty the market has in assessing the impact of these bills. Further, the more concentrated the legislator's interest in the industry, the more informative are her votes for future returns. (C) 2013 Elsevier B.V. All rights reserved.