Securities Class Action Lawsuits

Date: 12-2002
Author: Craig McCann, Ph.D., CFA

Investors sometimes sue publicly traded companies, executives, accountants and underwriters alleging that important information concerning the companies was omitted or misrepresented thereby causing the investors to pay too much for the companies’ securities. Financial economists assist fact finders in determining whether allegedly omitted or misrepresented information was truly important or “material.” This is done with the use of event studies or by reference to published scientific literature. Financial economists help the parties reach settlements by estimating alleged damages. Alleged damages depend on the amount by which a company’s stock price was allegedly inflated and the number of shares that were bought at fraudulently inflated prices. In these slides, SLCG outlines the major issues in estimating alleged damages in securities class action lawsuits.


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