Bias-Corrected Estimation of Price Impact in Securities Litigation
30 Pages Posted: 24 Jul 2017 Last revised: 10 May 2018
Date Written: May 4, 2018
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: Suggested Citation