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

Anticipated effects of rate controls are best observed in abnormal returns 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 movem...

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Bibliographic Details
Published in:Review of industrial organization 2001-09, Vol.19 (2), p.149-164
Main Authors: HAVENNER, ARTHUR, HAZLETT, THOMAS W., LENG, ZHIQIANG
Format: Article
Language:English
Subjects:
Abnormal returns
Broadcast regulation
Broadcasting
Broadcasting industry
Cable television
Cable TV
Capital costs
Commercial regulation
Computer programming
Consumer protection
Consumers
Economic regulation
Economic theory
Economics
Effects
Financial investments
Financial regulation
Industrial organization
Industrial regulation
Investment
Investments
Legislation
Papers on Cable Television
Price regulation
Rate setting
Regulated industries
Regulation
Risk
Stock exchanges
Stock prices
Studies
Telecommunications
Telecommunications policy
Television
Uncertainty
Wage & price controls
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Summary:Anticipated effects of rate controls are best observed in abnormal returns 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 qualityadjusted cable rates. In addition, the uncertainty of the policy led to substantially increased stock betas in some sectors.
ISSN:0889-938X
1573-7160
DOI:10.1023/A:1011123915064