This article summarizes recent developments in research on market efficiency and their implications for fraud-on-the-market theory (FOMT). Part II of this article offers a brief history of, and legal rational for, FOMT and explains the relationship between the theory and the efficient market hypothesis. The recent evidence on market efficiency is summarized in Part III. Part IV presents new and previously existing evidence on the soundness of the rules of thumb suggested in Cammer v. Bloom, and investigates additional rules as well. In Part V, the article examines the appropriateness of FOMT in the specific case of Biben v. Card. Conclusions and implications of the recent empirical evidence for the proper scope of FOMT appear in Part VI.
Victor L. Bernard, Christine Ann Botosan, and Gregory D. Phillips,
Challenges to the Efficient Market Hypothesis: Limits to the Applicability of Fraud-on-the-Market Theory,
73 Neb. L. Rev.
Available at: http://digitalcommons.unl.edu/nlr/vol73/iss4/2