Document Type

Article

Comments

Forthcoming in Journal of Corporation Law

Abstract

This paper addresses one of the key issues – the foreseeability of the housing market downturn that began in September of 2007 and intensified in the fourth quarter of 2007 – that must be addressed in assessing the extensive securities class action litigation that has been filed against financial institutions (and others) seeking to recover damages for investor losses arising out of the credit market crisis. We begin our analysis of this issue by first discussing the legal centrality of this issue to much of this litigation. We then turn to answer the question of when the housing market downturn became foreseeable by analyzing housing prices (regional and nationwide), housing sales, housing future contracts, and various market spreads such as the ABX triple A indexes. We conclude that these data are consistent with the view that the housing market downturn was in fact not foreseen by the market prior to the fourth quarter of 2007.

Date of Authorship for this Version

5-1-2009

Keywords

law and economics, corporate law