Litigation Activity Indices

 

CORNERSTONE RESEARCH indices of securities class action filings characterize the intensity of securities litigation activity through time.

We group multiple litigation processes corresponding to the same underlying event (allegations of fraud resulting in stock price inflation and subsequent decline, etc) in one report card that we refer to as a "filing." We define the class period of the filing as the class period mentioned in the First Identified Complaint (according to the information in the Clearinghouse database). In most cases this class period corresponds to the first filed complaint or to the complaint that shows the most extensive class period.

Declines in market capitalization over extended periods may be driven by market, industry, and firm-specific factors. To the extent that the observed losses reflect factors unrelated to specific allegations in class action complaints, indices based on class period losses would not be representative of potential defendant exposure in class action litigation. DDL and MDL should not be considered indicators of liability or measures of potential damages. Instead, they estimate the impact of all the information revealed during or at the end of the class period, including information unrelated to the litigation.

For each filing we calculate two measures of decline in the market capitalization of traded common stock:

  1. Dollar value change in the market capitalization of the defendant firm from the trading day during the class period when its market capitalization was the highest to the trading day immediately following the end of the class period. We use the term "maximum dollar loss" as shorthand for this number.
  2. Dollar value change in the market capitalization of the defendant firm between the trading day immediately preceding the end of the class period and the trading day immediately following the end of the class period. We use the term "disclosure dollar loss" as shorthand for this number.

The indices exclude IPO Allocation, Analyst, and Mutual Fund Filings. The following indices describe litigation activity:

* DDL and MDL should not be considered indicators of liability or measures of potential damages. Instead, they estimate the impact of all of the information revealed during or at the end of the class period, including information unrelated to the litigation.