Effects of legislation events on US gaming stock returns and market turnings

The deregulation of casino gaming has become a new trend across the US since the beginning of this decade; but from the mid 1990s on, the voice of tightened regulation is lifted up by the public, while the "cyber-casino" (online gambling) business is also developing its own customer base. This study examines various Federal and state legislation events regarding casino gaming regulation and deregulation, and finds that the announcement effects on stock portfolio returns vary across different types of gaming companies. On average, gaming equipment suppliers and small casino operators are found to react to legislation events more significantly, compared with those large casino firms. Furthermore, since the casino gaming business is believed to be highly sensitive to the economic upturns and downturns, this paper also investigates the impacts on the risk-adjusted return (alpha) and the systematic risk (beta) of gaming stocks across "bull" (up) and "bear"(down) market situations. The results indicate that between July 1993 and December 1997, gaming stocks on average yield a significantly lower return and a significantly greater systematic risk against the US stock market. After changes in stock market conditions are controlled, the systematic risk is still considerably above the market average, but the excess return turns out insignificant. (C) 2001 Elsevier Science Ltd. All rights reserved.