# Law on the Market? Abnormal Stock Returns and Supreme Court Decision-Making

**Authors:** Daniel Martin Katz, Michael J Bommarito II, Tyler Soellinger, James Ming Chen  
**arXiv:** [1508.05751](https://arxiv.org/abs/1508.05751)  
**Date:** 2015-08-24  
**Summary page:** https://www.summarizepaper.com/en/paper/1508.05751v2/

## Key points

- Study by Daniel Martin Katz, Michael J Bommarito II, Tyler Soellinger, and James Ming Chen examines impact of Supreme Court decisions on publicly-traded firms
- First comprehensive analysis over a 15-year period with hundreds of cases and firms
- Use intra- and interday data to evaluate frequency and magnitude of statistically significant abnormal return events post-decision
- Approximately 5.3 cases and 7.8 stocks exhibit abnormal returns per term following Supreme Court rulings
- Out of 211 cases examined, 37% show an average abnormal return of 4.4% over a two-session window with an average $|t|$-statistic of 2.9
- Abnormal returns manifest over hours and days rather than minutes, impacting market efficiency
- Evidence supports a "law on the market" effect through observed abnormal return events
- Abnormal returns not immediately integrated into stock prices, indicating potential opportunities for investors to capitalize on market inefficiencies from Supreme Court actions

## Summary

The study "Law on the Market? Abnormal Stock Returns and Supreme Court Decision-Making" by Daniel Martin Katz, Michael J Bommarito II, Tyler Soellinger, and James Ming Chen examines the impact of Supreme Court decisions on publicly-traded firms. This is the first comprehensive analysis of this relationship over a 15-year period encompassing hundreds of cases and firms. The researchers use both intra- and interday data to evaluate the frequency and magnitude of statistically significant abnormal return events after decisions are made. They find that approximately 5.3 cases and 7.8 stocks exhibit abnormal returns per term following Supreme Court rulings. Out of 211 cases examined, 37% show an average abnormal return of 4.4% over a two-session window with an average $|t|$-statistic of 2.9. The study also highlights that these abnormal returns manifest over hours and days rather than minutes, indicating implications for market efficiency in this context. While it is difficult to definitively separate substantive legal impacts from mere belief revisions in stock prices, strong evidence supports a "law on the market" effect through the frequency of observed abnormal return events. Importantly, these abnormal returns are not immediately integrated into stock prices, suggesting potential opportunities for investors to capitalize on market inefficiencies resulting from Supreme Court actions.