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What happens when the Supreme Court of the United States decides a caseimpacting one or more publicly-traded firms? While many have observed anecdotalevidence linking decisions or oral arguments to abnormal stock returns, fewhave rigorously or systematically investigated the behavior of equities aroundSupreme Court actions. In this research, we present the first comprehensive,longitudinal study on the topic, spanning over 15 years and hundreds of casesand firms. Using both intra- and interday data around decisions and oralarguments, we evaluate the frequency and magnitude of statistically-significantabnormal return events after Supreme Court action. On a per-term basis, we find5.3 cases and 7.8 stocks that exhibit abnormal returns after decision. Intotal, across the cases we examined, we find 79 out of the 211 cases (37%)exhibit an average abnormal return of 4.4% over a two-session window with anaverage $|t|$-statistic of 2.9. Finally, we observe that abnormal returnsfollowing Supreme Court decisions materialize over the span of hours and days,not minutes, yielding strong implications for market efficiency in thiscontext. While we cannot causally separate substantive legal impact from mererevision of beliefs, we do find strong evidence that there is indeed a "law onthe market" effect as measured by the frequency of abnormal return events, andthat these abnormal returns are not immediately incorporated into prices.

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