Market reaction to health care law: An event study

Musab Ababneh, Alex Tang

Abstract


We investigate the effect of the U.S. Supreme Court’s decision to uphold President Obama’s health care reform (Patient Protection and Affordable Care Act), and other reform-related events, on the stocks of impacted firms. More specifically, we use an event study methodology to compute cumulative average abnormal returns (CAARs) for health insurance companies, hospitals, brand-name drug makers, and generic drug makers. Overall, we find that the law has a negative effect on health insurance companies, and on generic drug makers. On the other hand, it has a positive effect on hospitals and on brand-name drug makers.

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DOI: http://dx.doi.org/10.5296/ijafr.v3i1.3356

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