THE INDUSTRY EFFECTS OF INFORMATION AND REGULATION IN THE CIGARETTE MARKET - 1950-1965

The authors investigate the historical effects of information and adve rtising regulation in the cigarette market. Their method is a series o f event analyses, which examines patterns of stock returns of major ci garette sellers during six crucial event periods in the years between 1950 and 1965. They find that the ''cancer scare'' of 1950, the episod e of fear advertising in 1953-54, and the 1962 report by the British R oyal College of Physicians adversely affected the marker valuations of the companies; however, the 1964 Surgeon General's report and subsequ ent labeling laws had no significant effect on the stock returns. They also find that the cessation of fear advertising, coincident with FTC policy guides prohibiting such claims, and the FTC-engineered ban on tar and nicotine advertising brought recovery in stock returns, but fa vored large firms over small firms.