The Competitive Effects of Trust-Busting: A Portfolio Analysis

Abstract

Monthly stock prices are used to analyze the competitive effects of the Sherman Act dissolutions carried out against Standard Oil, American Tobacco, and American Snuff on December 1, 1911. Statistical tests of the price changes accompanying important developments in the litigation show rather strongly that investors did not expect dissolution to alter the performance of the snuff, tobacco, and petroleum industries. This conclusion is similar to the findings of previous studies of these cases, and the results indicate that applications of stock prices and finance theory can significantly augment the empirical research methods of industrial organization.