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Indices
of securities class action filings characterize the
intensity of securities litigation activity through
time. The indices incorporate market information about
declines in stock prices over selected portions of class
periods as proxies for the potential loss of defendants
and their insurance carriers.
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:
A)
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.
B)
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 ten indices describe litigation
activity:
Class Action Filings Index (CAF Index™) is
the count of class action filings during a period.
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