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The economic doctrine of market efficiency plays an essential role in securities fraud litigation. In lawsuits alleging violations of SEC Rule 10b-5, the plaintiffs typically must argue that the market for the relevant security is efficient, and therefore that the “fraud on the market” doctrine applies. However, the term “market efficiency” is often applied imprecisely. In this chapter, we discuss properties of efficient markets that have been proposed in academic research, legal scholarship, and case law. We explore what must be assumed about capital markets for each of these properties to hold. We then ask how, in practice, each property could be rebutted.

This issue of Research in Law and Economics covers several areas of important research by a variety of international scholars. It contains theoretical papers on privacy, the protection of personal data, the use of regulatory monitoring under legal standards vs. rules, a study of the properties of market efficiency in securities fraud litigation, as well as an analysis of nonexclusionary price floors. It also contains an empirical paper on the relationship between uncertainty of patent approval of artificial intelligence applications and the Supreme Court's decision in Alice Corp. v. CLS Bank International. Finally, Volume 30 contains a law-and-economics assessment of the Chinese financial system within the context of the trade-off between centralized control and rapid growth.