Emerging Issues In Evaluating Market Efficiency: Part 1

Law360, New York (July 18, 2012, 4:45 PM EDT) -- Typically in securities litigation, market efficiency is evaluated by analyzing the five Cammer factors: trading volume, analyst coverage, market makers, S-3 eligibility, and empirical evidence of stock price reactions. Because an event study determines whether a company's stock reacts appropriately to the release of new information, experts and courts have traditionally utilized event studies to analyze the empirical factor, (i.e. whether it fulfills the fifth Cammer factor).

Increasingly, experts have begun to supplement, or in some cases replace, event study analysis with serial correlation analysis to empirically evaluate market efficiency. However, serial correlation analyses are not necessarily germane to the determination...

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