Underestimation of Securities Fraud Aggregate Damages Due to Inter-Fund Trades

Steven Feinstein, Gang Hu, Mark Marcus and Zann Ali

Journal of Forensic Economics, 2013, vol. 24, issue 2, 161-173

Abstract: Aggregate damages in class action securities cases estimated using standard methodologies and public volume data may be understated due to the frequent occurrence of inter-fund trades. Inter-fund trades are internal crossing trades between funds within the same fund family and are one of the few instances of trading transactions that are not reported publicly. Consequently, while inter-fund trades show up in submitted claims they are omitted from the public trade volume data generally used to estimate aggregate damages. Using actual claims data obtained from a claims administrator in a recent case, we find a significant number of damaged shares attributable to inter-fund trades, for which traditional damage estimation models do not account without an adjustment to the models' trading volume input. Our findings have implications for how aggregate damages should be estimated and call for policy reform in the reporting of inter-fund trades.

JEL-codes: K13 (search for similar items in EconPapers)
Date: 2013
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.journalofforensiceconomics.com/doi/abs/10.5085/jfe.24.2.161 (text/html)
http://www.journalofforensiceconomics.com/doi/pdf/10.5085/jfe.24.2.161 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fek:papers:doi:10.5085/jfe.24.2.161

DOI: 10.5085/jfe.24.2.161

Access Statistics for this article

More articles in Journal of Forensic Economics from National Association of Forensic Economics Contact information at EDIRC.
Bibliographic data for series maintained by Kurt Krueger ( this e-mail address is bad, please contact ).