Abstract 

When wrongdoing affects the value of an investment, the change in its price after the wrong has come to light is an appealing gauge of damages. But it is a biased gauge relative to intrinsic harm, because anticipation of the remedy itself informs price. We develop a model of price drop damages that allows one to characterize the extent as well as the direction of bias. We show that price drop damages overstate harm when the expected net award flowing to purchasers of the relevant security is positive, as in a corporate derivative case; but that they understate harm when the net recovery is negative, as in a securities fraud case. Our analysis thus identifies, and offers a means to weigh contextually, an overlooked downside to leveraging the wisdom of crowds. 

Paper can be downloaded here.

Practicalities

This event will be a hybrid event. The seminar will take place in Roeterseiland campus (REC) building A, room number A3.01, and will also be streamed online via Zoom.  

About the speaker 

Adriana Robertson is the Donald N. Pritzker Professor of Business Law at the University of Chicago Law School. She is also an editor of the Journal of Legal Studies and a research member at the European Corporate Governance Institute (ECGI). Her research interests lie at the intersection of law and finance.

About ACLE

The Amsterdam Center for Law and Economics (ACLE) is a joint initiative of the Faculty of Economics and Business and the Faculty of Law at the University of Amsterdam. The objective of the ACLE is to promote high-quality interdisciplinary research at the intersection between law and economics.