Emerging Issues in Evaluating Market Efficiency: Part 1 - Serial Correlation

Law 360, Securities and Class Action Expert Analysis Sections, 2012

7 Pages Posted: 8 Jul 2013 Last revised: 2 Aug 2013

See all articles by Gang Hu

Gang Hu

Hong Kong Polytechnic University - School of Accounting and Finance

Mark Marcus

Crowninshield Financial Research

Date Written: July 18, 2012

Abstract

The presence of serial correlation, properly analyzed, does not necessarily impact a security's ability to appropriately assimilate new information into its price. As long as information, when it is released, is incorporated into the price of a security, then misrepresentations and omissions, too, are incorporated. As a result, investors who relied on the integrity of the security’s price would necessarily have relied on the misrepresentations and omissions, satisfying the reliance condition for class certification.

Keywords: securities litigation, market efficiency, serial correlation, fraud-on-the-market

JEL Classification: K22, G14

Suggested Citation

Hu, Gang and Marcus, Mark, Emerging Issues in Evaluating Market Efficiency: Part 1 - Serial Correlation (July 18, 2012). Law 360, Securities and Class Action Expert Analysis Sections, 2012. Available at SSRN: https://ssrn.com/abstract=2289998

Gang Hu (Contact Author)

Hong Kong Polytechnic University - School of Accounting and Finance ( email )

M1038, Li Ka Shing Tower
Hung Hom, Kowloon
Hong Kong
(852) 3400 8455 (Phone)

HOME PAGE: http://ganghu.org

Mark Marcus

Crowninshield Financial Research ( email )

14 Mica Lane
Suite 202
Wellesley, MA 02481
United States

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