The 1989 case of Cammer v. Bloom established the five “Cammer factors” that are used as benchmarks for gauging market efficiency in securities class actions under Section 10b-5 of the 1934 Exchange Act. The Cammer factors require a showing of a sufficiently high average weekly trading volume, sufficient number of analysts following, sufficient number of market makers, eligibility to file a form S-3, and the presence of a cause and effect relationship between unexpected material disclosures and changes in the security’s price.
This Bloomberg Law article examines the first Cammer factor: weekly turnover. While trading volume has increased over time, there is still a non-trivial fraction of exchange-traded companies that do not satisfy the minimal 1% Cammer turnover threshold for market efficiency. However, 98% of large exchange-traded companies exceed the 1% Cammer turnover threshold. The finding that a significant portion of stocks do not meet the Cammer turnover threshold contrasts with the claim that merely trading on a major U.S. exchange ensures efficiency. There is also evidence that more companies targeted by 10b-5 actions meet the Cammer volume factor thresholds, suggesting that plaintiffs take into account the likelihood of satisfying the Cammer factors in filing a lawsuit.