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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.
There
is no rational reason to believe that these declines
are a credible measures of the damages that could be
awarded in any action. The measures are instead a metric
that describes the valuations changes in companies that
have been sued without regard to the reasons for the
decline. The measures can thus be taken as a rough approximation
of the extent to which plaintiffs have sought to allege
that gross market cap declines are correlated with (if
not caused by) alleged frauds.
For
each filing we calculate two measures of decline in
the market capitalization of traded common stock:
A)
Decline from the trading day when market capitalization
reached its maximum during the class period 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)
Decline from the trading day immediately preceding the
end of class period to 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 six indices describe litigation
activity:
Class
Action Filings Index (CAF Index™) is
the count of class action filings during a period.
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