Event Studies Using Contemporaneous Forward-Looking Information

Parties to securities litigation often rely on analysis of the price impact of particular news through an event study in connection with class certification and arguments on loss causation and damages. In an event study, the economic expert typically uses a statistical model to assess the portion of the stock price reaction due to such news and not due to market factors or noise. In this article, we describe a novel way to implement this statistical model that more readily incorporates investors’ forward-looking views, while maintaining a solid basis in economic theory.