Forecasting the Impact of Racial Uprisings, Market versus Stakeholders' Expectations

Given police abolitionism’s new visibility after the 2020 racial justice protests, we assess stakeholder beliefs on the protests’ stock impacts on police-affiliated firms. Experts generally underestimate the firms’ stock gains, except situated experts like community organizers and police experts, who link the market responses to reforms, not budget cuts. An experiment with nonexperts and finance professionals shows negatively skewed stock predictions among respondents lacking information on policing products and no effect of exposure to narratives about the protests on forecast alignment. National data show enduring support for police reform despite abolitionist advocacy and little understanding of the Defund movement’s objectives.

Duke Scholars

Author Bocar A Ba Economics