University of California, Riverside

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Richard Smith's co-authored paper, published in the Journal of Empirical Legal Studies, examines fraud-on-the-market theory and the efficient markets hypothesis.

(May 17, 2011)

Professor of Finance and Philip L. Boyd Chair Richard Smith recently published an article in the June 2011 issue of the Journal of Empirical Legal Studies, titled “The Paradox of ‘Fraud-on-the-Market Theory’: Who Relies on the Efficiency of Market Prices?”

The article, which Smith co-authored with Grigori Erenburg (University of Western Ontario) and Janet Kiholm Smith (Claremont McKenna College), sheds light on an inconsistency between the efficient markets hypothesis used in securities fraud litigation, and how U.S. courts have applied it in cases of market fraud. The authors test whether factors applied by courts in assessing market efficiency do in fact have relationships to weak-form market efficiency, and whether groups of investors might benefit from a rejection of market efficiency.


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