Health Care Reform and Health Care Stocks: Evidence from the Supreme Court Ruling
affiliation not provided to SSRN
July 16, 2012
Becker Friedman Institute for Research in Economics Working Paper No. 2012-009
The Patient Protection and Affordable Care Act of 2010 marked a substantial shift in US healthcare policy. We create an event study observing the returns of healthcare stocks in the S&P 500 when on June 28, 2012 the US Supreme Court very unexpectedly ruled that the individual mandate, a provision requiring that Americans maintain a certain level of health insurance or face a monetary penalty, was not unconstitutional. The paper finds that as a result of the upheaval, over two days following the ruling the cumulative average abnormal return of managed care stocks was -6.7% (equal to -$6.9 bn in market capitalization), while the same metric was -1.2% (-$1.5 bn) for biotechnology companies, 3.2% ($0.4 bn) for hospital firms, 1.9% ($1.6 bn) for healthcare service firms, and 0.5% ($4.8 bn) for pharmaceutical companies. Healthcare equipment, distribution, and technology sub-industry stocks had relatively flat cumulative abnormal returns over the period.
Number of Pages in PDF File: 23
Keywords: Legislatures, and Voting Behavior, Information and Market Efficiency, Event Studies, Analysis of Health Care Markets, Industrial Policy
JEL Classification: D72, G14, I11, L52working papers series
Date posted: July 17, 2012
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo4 in 0.375 seconds