Did Financial Markets React to the Overturning of Roe v. Wade? An Event Study on the U.S. Stock Market’s Response to Legislation Affecting Reproductive Rights

Abstract

Abortion has remained a contentious issue across the United States for the better part of the last century. On June 24th, 2022, the Supreme Court overturned Roe v. Wade which had provided constitutional protection of abortion since 1973. This left access to abortion under the purview of state governments, resulting in a patchwork of laws across the country. The Supreme Court’s decision directly affected thousands, if not millions, of lives, and is hypothesized to have ripple effects throughout all facets of America. This paper attempts to determine whether increasingly stringent abortion legislation has a negative impact on firms’ performance. This is done using event study methodology, seeking to detect effects on firms by analyzing their security prices on May 3rd, when a Supreme Court draft opinion indicating the imminent cessation of federal protection was leaked. Data used for the analysis comprises 990,224 daily return observations for 3,021 firms. We investigate effects on equity prices at increasing levels of granularity, specifically looking at effects at the national- and state-level. Furthermore, we divide the country into four categories based on pre-Roe legality, and whether the legality is likely to change. Our results are scattered, with some results bordering statistically significant support for our hypotheses. Overall, however, we do not find evidence to reject any of the null hypotheses. Confounding events and a market context making effective event study specification difficult affected our results.