Law on the Market – Supreme Court and Stock Market Movements – Paper Presented at University of Chicago Workshop on Judicial Behavior – Organized by Lee Epstein, Frank Easterbrook, Dennis Hutchinson, William Landes and Richard Posner

Today – on behalf of my co-authors — I presented at the University of Chicago – Workshop on Judicial Behavior – Organized by Lee Epstein, Frank Easterbrook, Dennis Hutchinson, William Landes and Richard Posner.   I think we have a very appropriate UChicago styled paper on Judicial Decision Making and Stock Market Movements.

Law on the Market – Presentation at Depaul University College of Law

Starting my fall road show across Chicago Area law schools, today I gave the faculty lunch seminar at Depaul University College of Law.  I presented our paper on Judicial Decision Making and Stock Market Movements.  Thanks to the good folks at Depaul for your thoughtful comments on the paper.

University of Chicago – Workshop on Judicial Behavior: Dan Katz on Court Decisions and Stock Prices

On behalf of my co-authors — next month —  I will be presenting at the University of Chicago – Workshop on Judicial Behavior – Organized by Lee Epstein, Frank Easterbrook, Dennis Hutchinson, William Landes and Richard Posner.   I think we have a very appropriate UChicago styled paper on Judicial Decision Making and Stock Market Movements.

Law on the Market? Abnormal Stock Returns and Supreme Court Decision-Making (Version 2.01 on arXiv)


Here is Version 2.01 of the Law on the Market Paper
From the AbstractWhat happens when the Supreme Court of the United States decides a case impacting one or more publicly-traded firms? While many have observed anecdotal evidence linking decisions or oral arguments to abnormal stock returns, few have rigorously or systematically investigated the behavior of equities around Supreme Court actions. In this research, we present the first comprehensive, longitudinal study on the topic, spanning over 15 years and hundreds of cases and firms. Using both intra- and interday data around decisions and oral arguments, we evaluate the frequency and magnitude of statistically-significant abnormal return events after Supreme Court action. On a per-term basis, we find 5.3 cases and 7.8 stocks that exhibit abnormal returns after decision. In total, across the cases we examined, we find 79 out of the 211 cases (37%) exhibit an average abnormal return of 4.4% over a two-session window with an average |t|-statistic of 2.9. Finally, we observe that abnormal returns following Supreme Court decisions materialize over the span of hours and days, not minutes, yielding strong implications for market efficiency in this context. While we cannot causally separate substantive legal impact from mere revision of beliefs, we do find strong evidence that there is indeed a “law on the market” effect as measured by the frequency of abnormal return events, and that these abnormal returns are not immediately incorporated into prices.