Stanford Securities Class Action Clearinghouse

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Copyright © 2001
Stanford Law School

Litigation Activity Indices

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INDICES OF SECURITIES CLASS ACTION FILINGS
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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:

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 indices describe litigation activity:

Class Action Filings Index (CAF Index™)
The number of class actions filed during a period.

Class Action Filings-Unique Issuers Index (CAF-U Index™)
The number of unique issuers whose exchange-traded securities were involved in class actions.

Median Lag Time
The number of days between the end of class periods and the filing dates.

S&P 500 Securities Litigation Heat Maps™

Percentage of Companies Subject to New Filings
The percent of the companies in the S&P 500 Index at the beginning of the year that was subject to new securities class actions.

Percentage of Market Capitalization Subject to New Filings
The share of market capitalization that was accounted for by companies in the S&P 500 Index named in new securities class actions.

Percentage of Market Capitalizations Subject to New Filings

Disclosure Dollar Loss Index (DDL Index™).

The dollar value change in the defendant firm’s market capitalization between the trading day immediately preceding the end of the class period and the trading day immediately following the end of the class period.

Maximum Dollar Loss Index (MDL Index™)

The dollar value change in the defendant firm’s market capitalization from the trading day with the highest market capitalization during the class period to the trading day immediately following the end of the class period.

MDL and DDL 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.