The authors investigate the historical effects of information and advertising regulation in the cigarette market. Their method is a series of event analyses, which examines patterns of stock returns of major cigarette sellers during six crucial event periods in the years between 1950 and 1965. They find that the “cancer scare” of 1950, the episode of fear advertising in 1953–54, and the 1962 report by the British Royal College of Physicians adversely affected the market valuations of the companies; however, the 1964 Surgeon General's report and subsequent 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 favored large firms over small firms.
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