Bias-Corrected Estimation of Price Impact in Securities Litigation

30 Pages Posted: 24 Jul 2017 Last revised: 10 Jul 2018

Taylor Dove

University of Utah - David Eccles School of Business

Davidson Heath

University of Utah David Eccles School of Business

J.B. Heaton

University of Chicago Law School; Conjecture LLC

Date Written: May 4, 2018

Abstract

The single-firm event studies that securities litigants use to detect the impact of a corrective disclosure on the price of a publicly traded security cannot average away confounding effects. Therefore, damages in securities litigation are biased and systematically overestimated. We use the empirical distribution of daily stock returns to analyze the bias and develop bias-corrected estimators of price impact in securities litigation.

Keywords: Event Studies, Securities Litigation, Bias Correction, Price Impact, Compensatory Damages, Punitive Damages

JEL Classification: G14, K13, K22

Suggested Citation

Dove, Taylor and Heath, Davidson and Heaton, J.B., Bias-Corrected Estimation of Price Impact in Securities Litigation (May 4, 2018). Available at SSRN: https://ssrn.com/abstract=3005878 or http://dx.doi.org/10.2139/ssrn.3005878

Taylor Dove

University of Utah - David Eccles School of Business ( email )

1645 E Campus Center Dr
Salt Lake City, UT 84112-9303
United States

Davidson Heath (Contact Author)

University of Utah David Eccles School of Business ( email )

Salt Lake City, UT 84112
United States

J.B. Heaton

University of Chicago Law School ( email )

1111 East 60th Street
Room 608
Chicago, IL 60637
United States

Conjecture LLC

Chicago, IL
United States

HOME PAGE: http://conjecturellc.com

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