During popular prime-time television shows, forensic investigators use specialized but wide-ranging scientific knowledge of chemical trace evidence, bacteria, DNA, teeth, insects, and other specialties to collect and sift evidence of possible crimes. In economics and finance, forensic investigators apply their own specialized knowledge of prices, quantities, timing, and market institutions -- and sometimes discover or substantiate evidence that is used by regulatory or criminal enforcement agencies. In this article, I will discuss four recent topics in forensic finance, all of which have attracted media attention: 1) the late trading of mutual funds, 2) stock option backdating, 3) the allocation of underpriced initial public offerings to corporate executives, and 4) changes in the records of stock analyst recommendations. In most of these cases, once certain practices or patterns have been publicized, financial industry practice has changed.
Volume (Year): 22 (2008)
Issue (Month): 3 (Summer)
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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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- Eric Zitzewitz, 2003.
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Oxford University Press, vol. 19(2), pages 245-280, October.
- Zitzewitz, Eric, 2002. "Who Cares About Shareholders? Arbitrage-Proofing Mutual Funds," Research Papers 1749, Stanford University, Graduate School of Business.
- Alexander Ljungqvist & Christopher Malloy & Felicia Marston, 2009. "Rewriting History," Journal of Finance, American Finance Association, vol. 64(4), pages 1935-1960, 08.
- William G. Christie & Paul H. Schultz, 1995. "Policy Watch: Did Nasdaq Market Makers Implicitly Collude?," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 199-208, Summer.
- Tim Loughran & Jay Ritter, 2004. "Why Has IPO Underpricing Changed Over Time?," Financial Management, Financial Management Association, vol. 33(3), Fall.
- Heron, Randall A. & Lie, Erik, 2007. "Does backdating explain the stock price pattern around executive stock option grants?," Journal of Financial Economics, Elsevier, vol. 83(2), pages 271-295, February.
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