Law on the Market

A groundbreaking empirical study investigating the financial market impact of Supreme Court decisions. This research provides the first comprehensive, longitudinal analysis of how judicial rulings affect publicly traded companies’ stock prices.

Key Findings

• Analyzed 211 Supreme Court cases over 15 years impacting publicly traded firms
• 79 cases (37%) exhibited significant abnormal returns
• Average abnormal return of 4.4% over a two-session window
• Abnormal returns materialize over hours and days, not minutes
• Supreme Court decisions responsible for over $140 billion in absolute wealth changes

Methodology

The study employs sophisticated event study methodology:

• Intraday and interday stock market data analysis
• Statistical significance testing with average |t|-statistic of 2.9
• Examination of both oral arguments and final decisions
• Control for market-wide movements and firm-specific factors

Research Impact

This work provides strong evidence for a “law on the market” effect, demonstrating that:

• Legal decisions have measurable economic impacts
• Markets do not immediately incorporate legal information
• Supreme Court rulings create significant trading opportunities

Authors

Collaborative research with:

• Daniel Martin Katz (Illinois Tech - Chicago Kent College of Law)
• Tyler Soellinger (Michigan State University - College of Law)
• James Ming Chen (Michigan State University - College of Law)