The Second Circuit rejected the notion that complicated event studies
be submitted by Plaintiffs at the class certification stage, agreeing with plaintiffs that event studies
offer the seductive promise of hard numbers and dispassionate truth, but methodological constraints limit their utility in the context of single-firm analyses.
The studies conducted to typically examine the market reactions to specific kind of announcements are called event studies
Traditional event studies
are designed to capture the financial market's expectation as to the overall performance results of mergers.
Prior catastrophe event studies
focusing on insurers find that insurers generally experience negative abnormal returns as a result of their expected loss payments (Lamb, 1995; Cummins and Lewis, 2003; Doherty, Lamm-Tennant, and Starks, 2003).
Employing vector auto regressions (VARs), which may be better suited to the task than event studies
, we find a consistently positive effect during the crisis era of general monetary policy variables on the financial markets, and clear effectiveness of some of the Fed's innovative policy actions.
Out of this total number of event studies
, we observe significant values for the volatility index in 119 cases.
are appropriated from a larger literature in
are commonly used in economic research.
These issues include the relationship between materiality and price impact, the distinction between hypothetical versus actual changes in the total mix of information made available to the market, the use of event studies
, and some lower courts ' refusal to consider certain types of economic evidence in the context of price impact arguments.
In most event studies
, information leakage is a common concern because it occurs when a small group of investors obtains information regarding a relevant event prior to the official public release.
Moreover improvements can be observed in firms performance after top management changes in the empirical literature, identifying forced removal or departures is difficult, because press reports do not describe them as such since a removal or departure announced as a retirement may be in reality a forced resignation, thus making it difficult to carry out event studies
aimed at determining it financial markets discipline firms for illegal corporate behaviour (corporate governance failure via falling share prices and firm value.
Moreover, the Court's suggestion, in Halliburton II, that defendants can use event studies
to prove the absence of price impact (19) is not methodologically sound.