Stock Returns, Real Activity, and the Trust Question



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    • Graduate School of Management, University of California, Davis, and Center for the Study of the Economy and the State, The University of Chicago. Conversations with Rick Castanias, Peter Clark, Jay Ritter, David Rocke, Lester Telser, and Walter Torous have helped me sharpen my arguments and analysis of the data. I also appreciate the helpful comments of the referee and the editor. Harold Mulherin provided the daily Dow data. This paper was presented at the annual meeting of the American Finance Association, held January 1992 in New Orleans.


Periodic antitrust attacks on corporations may have influenced stock prices. For the period 1904 to 1944, each antitrust case filed is associated with a 0.5 to 1.9 percent drop of the Dow, and each unexpected case with even larger drops. Other aspects of antitrust besides actual filings may help account for other movements, in particular the 1929 Crash. Historical evidence bears on the question of whether antitrust is exogenous and also links antitrust and the “corporation problem.” These results illustrate the sorts of real factors aside from changes in concurrent output that may account for stock price volatility.