Boom, Bust and Betrayal- Business cycles and securities fraud in the US between 1996-2019
Abstract
We study the relationship between macroeconomic factors and the number of settled securities
fraud cases through the proxy of SEC class action lawsuits. We perform an empirical
study of all SEC class action convictions between 1996-2019 and their relationship with
business cycles as proxied by a housing price index and GDP. Furthermore, our dynamic
model looks at the effect of market volatility and unemployment as well as the persistence
in the time series of lawsuits. Alongside this, we study the extreme circumstances of the
dot com bubble of 1999. We use non-parametric models such as GAM and MARS to
better account for business cycle fluctuations. We find that the most significant effects
seem to be coming from the dot com bubble, which was the only extreme outlier in our
dataset, and the one month lag of the number of fraud cases. There is also an indication
that both market volatility and business cycles may be correlated with the prevalence of
securities fraud in our MARS model. However, the robustness checks did not find these
significant for GAM.
Degree
Master 2-years
Other description
MSc in Economics
Collections
View/ Open
Date
2021-06-29Author
Carshaw, Viktoria
de Vries, Rinske
Series/Report no.
Master Degree Project
2021:159
Language
eng