Intraday Trading Rates in Shareholder Class Actions
1 June 2002
By Dr. David Tabak
In this paper, NERA Senior Vice President Dr. David Tabak explores the intricacies of the "intraday trading rate," an important input used in the estimation of affected shares in 10b-5 shareholder class action litigations. The intraday trading rate is defined as the percent of trades accounted for by trades in which an investor buys and sells the same shares in the same day.
When a class period extends for more than one day, the intraday trading rate is a critical consideration in order to accurately estimate how much of the reported volume on any given day represents shares that were actually retained to the end of the day. Dr. Tabak reviews a number of studies that have attempted to estimate the percentage of intraday trading, and explains how NERA somewhat differently computes its own intraday rates. He concludes by recommending three ways to estimate the number of affected shares in a shareholder class action.
