The Effects of Rate Regulation on Mean Returns and Non-Diversifiable Risk: The Case of Cable Television

The Effects of Rate Regulation on Mean Returns and Non-Diversifiable Risk: The Case of Cable... Anticipated effects of rate controls are best observed in abnormalreturns in sectors providing complements and substitutes to the sector targeted for regulation. Further, risk may rise in response to rate controls, increasing the cost of capital and lowering investment. We examine stock price movements during events tied to the 1992 Cable Act, which reinstituted price controls on U.S. cable TV operators. We find strong evidence that controls were not anticipated to lower quality-adjusted cable rates. In addition, the uncertaintyof the policy led to substantially increased stock betas in some sectors. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Industrial Organization Springer Journals

The Effects of Rate Regulation on Mean Returns and Non-Diversifiable Risk: The Case of Cable Television

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Publisher
Kluwer Academic Publishers
Copyright
Copyright © 2001 by Kluwer Academic Publishers
Subject
Economics; Industrial Organization; Microeconomics
ISSN
0889-938X
eISSN
1573-7160
D.O.I.
10.1023/A:1011123915064
Publisher site
See Article on Publisher Site

Abstract

Anticipated effects of rate controls are best observed in abnormalreturns in sectors providing complements and substitutes to the sector targeted for regulation. Further, risk may rise in response to rate controls, increasing the cost of capital and lowering investment. We examine stock price movements during events tied to the 1992 Cable Act, which reinstituted price controls on U.S. cable TV operators. We find strong evidence that controls were not anticipated to lower quality-adjusted cable rates. In addition, the uncertaintyof the policy led to substantially increased stock betas in some sectors.

Journal

Review of Industrial OrganizationSpringer Journals

Published: Oct 3, 2004

References

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