How Efficient is Sufficient: Applying the Concept of Market Efficiency in Litigation

The Business Lawyer, Vol. 74, Spring 2019

18 Pages Posted: 16 Jan 2020

See all articles by Bradford Cornell

Bradford Cornell

Anderson Graduate School of Management, UCLA

John Haut

Compass Lexecon

Date Written: December 1, 2018

Abstract

The concept of market efficiency has been adopted by courts in a variety of contexts. In reality, markets can never be perfectly efficient or inefficient, but exist somewhere in between depending on the facts and circumstances. Courts, therefore, face a problem in deciding how efficient is sufficient in any particular legal context. Because market prices incorporate the views of numerous market participants, courts have often been willing to presume that a market is efficient so long as the appropriate criteria are satisfied. However, those criteria are different for different types of cases, such as securities class actions, appraisal actions, and cram downs in bankruptcy.

Keywords: Market Efficiency, Litigation, Law and Economics

JEL Classification: G00, K00

Suggested Citation

Cornell, Bradford and Haut, John, How Efficient is Sufficient: Applying the Concept of Market Efficiency in Litigation (December 1, 2018). The Business Lawyer, Vol. 74, Spring 2019. Available at SSRN: https://ssrn.com/abstract=3509482

Bradford Cornell (Contact Author)

Anderson Graduate School of Management, UCLA ( email )

Pasadena, CA 91125
United States
626 833-9978 (Phone)

John Haut

Compass Lexecon ( email )

United States

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