Noisy Factors in Law – CLE Vlog with Prof. Adriana Robertson (Chicago)
In the new episode of the CLE vlog series, Adriana Robertson (University of Chicago) discusses her study "Noisy Factors in Law" with Alessandro Tacconnelli (ETH Zurich). Factor models are commonly used to perform valuations, performance evaluation, and event studies across a wide variety of contexts, many of which rely on data provided by Prof. Kenneth French. Yet, these data are beset by a problem: Widespread retroactive changes which can materially affect a broad range of estimates.
For years, academic experts have championed the widespread adoption of the “Fama-French” factors in legal settings. In their study, external page Adriana Robertson and her co-authors external page Mikhail Simutin and external page Pat Akey (both University of Toronto) show how these retroactive changes, heretofore overlooked by experts, can have enormous impacts in precisely the settings in which experts have pressed for their use. They provide examples of valuations, performance analysis, and event studies in which the retroactive changes have a large—and even dispositive—effect on an expert’s conclusions. Their analysis demonstrates how even the most well accepted expert approaches can be fraught with hidden peril.
In the new episode of the Center for Law & Economics' vlog & podcast series, Adriana Robertson discusses the background and the findings of the study "Noisy Factors in Law" with Alessandro Tacconelli (ETH Zurich).
Watch the vlog on YouTube external page here.
Listen to the podcast version external page here.