Moody Investing and the Supreme Court: Rethinking the Materiality of Information and the Reasonableness of Investors

Authors

Peter H. Huang, University of Colorado Law SchoolFollow

Document Type

Article

Publication

Supreme Court Economic Review

Year

2005

Citation Information

Peter H. Huang, Moody Investing and the Supreme Court: Rethinking the Materiality of Information and the Reasonableness of Investors, 13 Sup. Ct. Econ. Rev. 99 (2005), available at https://scholar.law.colorado.edu/faculty-articles/469.

Abstract

This Article critically analyzes the judicial decisions and reasoning of the United States Supreme Court and lower courts accepting certain defenses in securities fraud litigation. This Article develops how and why the core notions of materiality of information and the reasonable investor should be revised in light of recent empirical data, experimental evidence, and theoretical models of moody investing. This Article proposes modifying three recent developments in materiality doctrine to take into account moody investing. In particular, this Article argues that current judicial treatment of puffery is flawed because it neglects the power of puffery to alter moods. This Article also recommends modifying the judicial "total mix" analysis of the materiality of information to include a "total affect" analysis of information. Finally, this Article proposes refining the judicially created so-called "bespeaks caution" doctrine and statutory safe harbors codifying it to inquire whether so-called "meaningful cautionary language" is infused with affect.

Comments

"© 2005 by the University of Chicago. All rights reserved."

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