Securities Litigation and the Housing Market Downturn

32 Pages Posted: 21 May 2009

See all articles by Allen Ferrell

Allen Ferrell

Harvard Law School; European Corporate Governance Institute (ECGI)

Atanu Saha

Compass Lexecon

Date Written: May 6, 2009


This paper addresses one of the key issues – the foreseeability of the housing market downturn that began in September of 2007 and intensified in the fourth quarter of 2007 – that must be addressed in assessing the extensive securities class action litigation that has been filed against financial institutions (and others) seeking to recover damages for investor losses arising out of the credit market crisis. We begin our analysis of this issue by first discussing the legal centrality of this issue to much of this litigation. We then turn to answer the question of when the housing market downturn became foreseeable by analyzing housing prices (regional and nationwide), housing sales, housing future contracts, and various market spreads such as the ABX triple A indexes. We conclude that these data are consistent with the view that the housing market downturn was in fact not foreseen by the market prior to the fourth quarter of 2007.

Keywords: securities litigation, class action, financial crisis, housing market downturn, 10b-5, loss causation, housing prices, housing sales

JEL Classification: G18, G21, G28, K22, K41, R21, R31

Suggested Citation

Ferrell, Allen and Saha, Atanu, Securities Litigation and the Housing Market Downturn (May 6, 2009). Available at SSRN: or

Allen Ferrell (Contact Author)

Harvard Law School ( email )

Griswold 303 1525 Massachusetts Avenue
Cambridge, MA 02138
United States
(617) 495-8961 (Phone)
(617) 495-1110 (Fax)

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels


Atanu Saha

Compass Lexecon ( email )

New York, NY
United States

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