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Moody Investing and the Supreme Court: Rethinking Materiality of Information and Reasonableness of Investors

25 Pages Posted: 11 Dec 2003  

Peter H. Huang

University of Colorado Law School

Date Written: December 10, 2003

Abstract

This Article critically analyzes the judicial decisions and reasoning of the United States Supreme Court and lower courts accepting certain defenses in securities fraud litigation. This Article develops how and why the core notions of materiality of information and the reasonable investor should be revised in light of recent empirical data, experimental evidence, and theoretical models of moody investing. This Article proposes modifying three recent developments in materiality doctrine to take into account moody investing. In particular, this Article argues that current judicial treatment of puffery is flawed because it neglects the power of puffery to alter moods. This Article also recommends modifying the judicial total mix analysis of the materiality of information to include a total affect analysis of information. Finally, this Article proposes refining the judicially created so-called bespeaks caution doctrine and statutory safe harbors codifying it to inquire whether so-called meaningful cautionary language is infused with affect.

Keywords: Moody Investing, Materiality, Reasonable Investor, Securities Regulation, Puffery, Total Mix of Information, Bespeaks Caution Doctrine

JEL Classification: K22, G28, D81

Suggested Citation

Huang, Peter H., Moody Investing and the Supreme Court: Rethinking Materiality of Information and Reasonableness of Investors (December 10, 2003). U of Penn, Inst for Law & Econ Research Paper 03-36. Available at SSRN: https://ssrn.com/abstract=478421 or http://dx.doi.org/10.2139/ssrn.478421

Peter H. Huang (Contact Author)

University of Colorado Law School ( email )

Colorado Law
401 UCB
Boulder, CO 80309
United States
303 492-4563 (Phone)
303-492-1200 (Fax)

HOME PAGE: http://lawweb.colorado.edu/profiles/profile.jsp?id=456

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