Counterfactual Keys to Causation and Damages in Shareholder Class Actions

38 Pages Posted: 21 Feb 2009

See all articles by Frederick C. Dunbar

Frederick C. Dunbar

U.S. Securities and Exchange Commission

Arun Sen

NERA Economic Consulting

Date Written: January 15, 2009

Abstract

Introducing quantitative rigor into the legal process has been proposed to reduce error and uncertainty in litigation. One area of law that would seem to be a candidate for such formalism would be proving causation. Yet most legal scholars balk at the idea that the legal principles of causation are based on anything as precise as, say, scientific causation. We believe that counterfactual analysis, a relatively recent trend in the philosophy of causation that is being applied in the social sciences, has a role in understanding causation in at least one important area of the law-shareholder class actions. The increasingly strict standards imposed by the Supreme Court over the past twenty years, culminating in the Dura decision, can be understood in the context of counterfactual analysis establishing loss causation. This approach then has important implications for estimating damages in shareholder class actions.

Keywords: securities, causation, event studies, damages, materiality, class actions

JEL Classification: K22

Suggested Citation

Dunbar, Frederick C. and Sen, Arun, Counterfactual Keys to Causation and Damages in Shareholder Class Actions (January 15, 2009). Wisconsin Law Review, Vol. 2009, No. 2, 2009. Available at SSRN: https://ssrn.com/abstract=1333900 or http://dx.doi.org/10.2139/ssrn.1333900

Frederick C. Dunbar (Contact Author)

U.S. Securities and Exchange Commission ( email )

100 F Street, NE
Washington, DC 20549
United States
202-551-3615 (Phone)

Arun Sen

NERA Economic Consulting ( email )

United States

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