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INDICES OF SECURITIES CLASS ACTION FILINGS
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.
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.
The indices exclude IPO
Allocation, Analyst, and Mutual Fund Filings. The following eight indices
describe litigation activity:
Class Action Filings Index (CAF Index™)
is the count of class action filings during a period.
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