After Halliburton: Event Studies and Their Role in Federal Securities Fraud Litigation

After Halliburton: Event Studies and Their Role in Federal Securities Fraud Litigation

Jill Fisch, Jonah Gelbach, Jonathan Klick

Series number :

Serial Number: 

Date posted :

August 01 2016

Last revised :

August 24 2016
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  • civil procedure • 
  • evidence • 
  • Supreme Court of the United States • 
  • SCOTUS • 
  • HalliburtonCo. v. Erica P. John Fund • 
  • Inc. • 
  • Basic • 
  • Inc. v. Levinson • 
  • fraud on the market • 
  • event study methodology • 
  • fraudulent information • 
  • significance • 
  • error rates • 
  • one-sided SQ test • 
  • securities fraud • 
  • 10b-5 litigation

Event studies have become increasingly important in securities fraud litigation after the Supreme Court?s decision in Halliburton II.

Litigants have used event study methodology, which empirically analyzes the relationship between the disclosure of corporate information and the issuer?s stock price, to provide evidence in the evaluation of key elements of federal securities fraud, including materiality, reliance, causation, and damages. As the use of event studies grows and they increasingly serve a gatekeeping function in determining whether litigation will proceed beyond a preliminary stage, it will be critical for courts to use them correctly. This Article explores an array of considerations related to the use of event studies in securities fraud litigation. It starts by describing the basic function of the event study: to determine whether a highly unusual price movement has occurred and the traditional statistical approach to making that determination. The Article goes on to identify special features of securities fraud litigation that distinguish litigation from the scholarly context in which event studies were developed. The Article highlights the fact that the standard approach can lead to the wrong conclusion and describes the adjustments necessary to address the litigation context. We use the example of six dates in the Halliburton litigation to illustrate these points. Finally, the Article highlights the limitations of event studies ? what they can and cannot prove ? and explains how those limitations relate to the legal issues for which they are introduced. These limitations bear upon important normative questions about the role event studies should play in securities fraud litigation.

Published in

Published in: 
Texas Law Review, Vol. 96, p. 553, 2018 | U of Penn, Inst for Law & Econ Research Paper No. 16-16


Real name:
Fellow, Research Member
University of Pennsylvania Law School
Real name:
Jonah Gelbach
Real name:
Jonathan Klick