Using Value Investing Measures as Predictors of Lawsuits: Value Risk Tools

Advisen is committed to providing a portfolio of measures for insurance professionals, only available on Advisen, to consider in assessing the risk of companies. Advisen showed through the Advisen Total Accrual Metric (ATACm) that while accrual accounting practices are correlated with securities class action lawsuits, proprietary adjustments made to the original academic research on accrual accounting increases such correlations substantially. As this is just one measure of risk, Advisen identified and tested other risk measures. Four measures akin to value investing have jumped to the fore, called Value Risk Tools, and each are proven to have strong correlations with the likelihood of attracting securities class action lawsuits.