How does gun control policy affect the stock price of firearm companies?

By Brent Radcliffe AAA
A:

Gun policy in the United States is set by both the federal government and the state governments. In general, companies that manufacture firearms, ammunition, and firearm accessories will find it easier to sell their products when fewer restrictions are in place.

Gun regulations can be broken into several broad categories: limitations on the types of guns that can be purchased, limitations on who can purchase guns, limitations on where guns can be carried, and limitations on where guns can be purchased.

Several cities and states have sought to restrict firearm possession, most notably in Washington D.C. and Chicago. While legislators and the Supreme Court can ultimate choose to overturn these regulations, the more difficult it is to possess a firearm the lower the demand for firearms by people who live in these areas.

Background checks and required waiting periods can reduce the demand for firearms by making it more difficult to obtain them and by reducing the number of individuals who are authorized to make a purchase. 

Regulations may also target where gun owners can take their weapons. Gun owners may purchase more guns if they are allowed to take them more places, and open carry laws may reduce gun demand if owners are not allowed to take them out of the home. Restrictions placed on hunting licenses, as well as the areas gun owners are permitted to hunt in, can impact the sale of certain types of weapons, such as rifles and semi-automatic weapons.

The market dynamics of gun ownership in the United States has shifted dramatically over the past few decades. The number of U.S. households that own guns has steadily declined over the years: PEW, a nonpartisan think tank based in Washington D.C. estimated that 37% of households had a gun in 2013, down from 45% in 1993. While the number of households with guns has declined, the number of guns per household has increased: Switzerland’s 2007 Small Arms Survey estimated that there were 270 – 310 million guns in the U.S. This means that gun manufacturers are selling to a smaller market, but that the market is more likely to purchase more than one gun.

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