Price Drop Damages
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Series
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Speaker(s)Adriana Robertson (University of Chicago Law School, United States)
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FieldFinance, Accounting and Finance
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LocationUniversity of Amsterdam, Campus Roeterseiland, A3.01 and online
Amsterdam -
Date and time
November 18, 2025
13:00 - 14:15
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. Joint paper with Vince Buccola.