Traders, guns, and money: The effects of mass shootings on stock prices of firearm manufacturers in the U.S.

Abstract

We investigate how mass shootings influence the stock price of firearms manufacturers. While it is well known that mass shootings lead to increased firearms sales, the response from financial markets is unclear. On one hand, given the observed short-term increase in demand, firearm stock prices may rise due to the unexpected financial windfall for the firm. On the other, mass shootings may result in calls for regulation of the industry, leading to divestment of firearms stocks in spite of short-term demand. We examine this tension using a market movement event study in the wake of 93 mass shootings in the U.S. between 2009 and 2013. Findings show that stock prices of firearm manufacturers decline after shootings; each event reducing prices between 22.4 and 49.5 basis points, per day. These losses are exacerbated by the presence of a handgun and the number of victims killed, but not affected by the presence of children or location of the event. Finally, we find that these effects are most prevalent in the period 2009–2010 but disappear in later events, indicating that markets appear to have accepted mass shootings as the “new normal.”

The Economics of Mass Shootings: How Investors React

“…Gopal and Greenwood suggested the number of casualties enhances the market return effect on firearm manufacturers (Gopal & Greenwood, 2017). This does not appear to hold true in this study.…”

“…Gopal and Greenwood also contemplated the notion that firearm type used in the mass shooting may cause the observed effect (Gopal & Greenwood, 2017). Once again, this study does not appear to support such a notion.…”

“…This acts as an extension of the work done by Gopal and Greenwood, who examined the mass shooting effects on RGR and AOBC separately from 2009 to 2013. Gopal and Greenwood found a significant effect in the first few years, but with the effect dissipating later (Gopal & Greenwood, 2017). The authors suggest the possibility of mass shootings becoming priced into the market valuations of RGR and AOBC.…”

“…One recent article expanded on the Cross & Pruitt concept by looking at the stock price changes of American Outdoor Brands (AOBC) and Sturm, Ruger & Co (RGR) after mass shootings from 2009 to 2013 (Gopal & Greenwood, 2017). Gopal & Greenwood utilized a market movement event study to explore the price changes of AOBC and RGR 2, 5, and 10 days after 93 mass shootings in the timeframe.…”

JULY — In(ter)dependence Day: Lives mattering, freedom with responsibility, and social well‐being

“…This constitutional right to bear arms is the subject of much debate in the US, especially following mass shootings and considering the fact that 31% of such shootings in the world occur in the US (Lankford, 2016). While it is also the case that, following a mass shooting in the US, gun sales tend to increase (Gopal & Greenwood, 2017), there does appear to be an increasing questioning of the centrality and sanctity of this right, and an advocacy of increased gun control. Most recently and notably, following the shooting at Stoneman Douglas High School in Parkland, Florida on 14 th February this year (2018) in which 17 students and staff were killed, this has found expression in the foundation of the #NeverAgain and #EnoughisEnough movements.…”