A Theoretical and Empirical Analysis of the Investor Losses in Securities Misrepresentation Cases: From the Perspective of the Efficient Market Hypothesis

XU Wen-ming; MO Dan

Volume 34 Issue 6

May 2021

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XU Wen-ming, MO Dan. A Theoretical and Empirical Analysis of the Investor Losses in Securities Misrepresentation Cases: From the Perspective of the Efficient Market Hypothesis[J]. Journal of Guangdong University of Finance & Economics, 2019, 34(6): 87-99.

Citation:

XU Wen-ming, MO Dan. A Theoretical and Empirical Analysis of the Investor Losses in Securities Misrepresentation Cases: From the Perspective of the Efficient Market Hypothesis[J]. Journal of Guangdong University of Finance & Economics, 2019, 34(6): 87-99.

Citation:

XU Wen-ming, MO Dan. A Theoretical and Empirical Analysis of the Investor Losses in Securities Misrepresentation Cases: From the Perspective of the Efficient Market Hypothesis[J]. Journal of Guangdong University of Finance & Economics, 2019, 34(6): 87-99.

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A Theoretical and Empirical Analysis of the Investor Losses in Securities Misrepresentation Cases: From the Perspective of the Efficient Market Hypothesis

XU Wen-ming¹,
MO Dan²

1.
School of Law and Economics, China University of Political Science and Law, Beijing 100088
2.
China Huarong Asset Management Co.Ltd., Beijing 100088, China

Received Date: 2019-07-04
Available Online: 2021-05-27
Publish Date: 2021-05-27

Abstract

Abstract

The estimation of losses in securities misrepresentation cases has been a challenge in both the judiciary practice and theoretical discussion. The empirical analysis of issued judgments concerning securities misrepresentation reveals that there is an obvious inconsistency in identifying the dates for revelation and estimating the reduction for systematic risks. The problem originates from the fact that "fraud on the market theory" only indicates that misrepresentation will affect securities prices, but fails to explain when and how the prices are affected. The efficient market hypothesis complements the theoretical insufficiency, and a theoretical model is formulated based on the above two theories. Furthermore, the event-study method is applied to a sample of listed stocks sanctioned by the China Securities Regulatory Commission and its regional offices, and it is found that they only experienced significant and negative abnormal returns around-12.03% on the date when these companies disclosed that they have received the Notice of Investigation. The aforementioned results extend the model used by the judiciary to calculate losses in cases of securities misrepresentation, which is expected to improve the efficiency of securities civil litigation institution.
- securities market,
- misrepresentation,
- civil liability,
- investor loss,
- efficient market hypothesis,
- fraud on the market theory

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References(48)

References

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