Traders, Guns, and Money: The Effects of Mass Shootings on Stock Prices of Firearm Manufacturers in the U.S.

42 Pages Posted: 22 Mar 2015 Last revised: 3 May 2017

See all articles by Anandasivam Gopal

Anandasivam Gopal

University of Maryland - Robert H. Smith School of Business

Brad N Greenwood

University of Minnesota - Twin Cities - Carlson School of Management

Date Written: March 20, 2015

Abstract

We investigate how mass shootings influence the stock price of firearms manufacturers. While it is well known that mass shootings lead to increased firearms sales, the response from financial markets is unclear. On one hand, given the observed short-term increase in demand, firearm stock prices may rise due to the unexpected financial windfall for the firm. On the other, mass shootings may result in calls for regulation of the industry, leading to divestment of firearms stocks in spite of short-term demand. We examine this tension using a market movement event study in the wake of 93 mass shootings in the U.S. between 2009 and 2013. Findings show that stock prices of firearm manufacturers decline after shootings; each event reducing prices between 22.4 and 49.5 basis points, per day. These losses are exacerbated by the presence of a handgun and the number of victims killed, but not affected by the presence of children or location of the event. Finally, we find that these effects are most prevalent in the period 2009-2010 but disappear in later events, indicating that markets appear to have accepted mass shootings as the “new normal.”

Keywords: mass shooting, event study, social contracts, firearms, financial markets

Suggested Citation

Gopal, Anandasivam and Greenwood, Brad, Traders, Guns, and Money: The Effects of Mass Shootings on Stock Prices of Firearm Manufacturers in the U.S. (March 20, 2015). Robert H. Smith School Research Paper No. RHS 2581664; Fox School of Business Research Paper No. 15-061. Available at SSRN: https://ssrn.com/abstract=2581664 or http://dx.doi.org/10.2139/ssrn.2581664

Anandasivam Gopal

University of Maryland - Robert H. Smith School of Business ( email )

College Park, MD 20742-1815
United States

Brad Greenwood (Contact Author)

University of Minnesota - Twin Cities - Carlson School of Management ( email )

19th Avenue South
Minneapolis, MN 55455
United States

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