We’re surprised and delighted at the impact our paper has had. It’s the first paper in a collaboration between psychologists and computer scientists at Cambridge. Of the two of us, David Modic is a psychologist and psychotherapist who’s been interested in cybercrime since the late 1990s, while Ross Anderson started as a mathematician, became a cryptographer, worked in industry, returned to academia and is now Professor of Security Engineering.
We have been aware for some time that psychological research into online security is at best patchy. Software firms had tried various
ad-hoc strategies to get people to comply with malware warnings, but with rather mixed success. Modic’s previous work showed that some psychological factors increase compliance in individuals who become victims of fraud. It seemed natural to explore whether these factors might also be used to communicate fraud warnings better, and it turned out that two of them did: making warnings more concrete and specific, and using appeals to authority. However, to our surprise, social influence did not work in this context.
3. Contested Universalities of International Law: Islam’s Struggle with Modernity
by Ebrahim Afsah (University of Copenhagen – Faculty of Law)
Our paper seeks to contribute to the expected reconsideration of fraud-on-the-market theory by the United States Supreme Court, which can be expected to have fundamental importance for securities litigation. We seek to contribute insights generated by our examination of the evidence on the efficient market hypothesis. By combining financial economics and legal policy, our paper might be of interests to legal scholars, practicing lawyers, financial economists, and public officials.
We show that, in contrast to claims made by the parties, the Justices need not assess the validity or scientific standing of the efficient market hypothesis; they need not, as it were, decide whether they find the view of Eugene Fama or Robert Shiller more persuasive. Class-wide reliance, we explain, should depend not on the “efficiency” of the market for the company’s security but on the existence of fraudulent distortion of the market price. We put forward an alternative approach – focused on the existence of fraudulent distortion – to ones advanced by those who wish either to preserve Basic as is or get rid of it all together. Our proposed approach provides a coherent and implementable framework for identifying class-wide reliance in appropriate circumstances. It also has the virtue of focusing on the economic impact (if any) of the actual misstatements and omissions at issue, rather than general features of the securities markets. -Lucian Bebchuk and Allen Ferrell