Last week saw the conclusion of Apple and Qualcomm’s much talked about royalties and patent lawsuit. When the news broke that Apple not only agreed to pay an undisclosed amount to Qualcomm as a settlement, but also struck a six-year licensing agreement with their foe, Qualcomm’s stock price surged by a record-setting 23%. While this jump would be expected following a lawsuit win, what was unexpected, however, was the stability of Apple’s stock price despite their loss.

Ultimately, this meant that, although both tech giants were involved in lawsuits – which commonly has a negative perception – investors that held long positions on the two firms saw positive returns on April 16th.

In this Intelligence piece, we summarize a 2018 academic paper that investigates the relationship between litigation and stock returns, and whether or not portfolios consisting of firms involved in lawsuits observe positive returns.

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To investigate whether there is in fact a correlation between litigation and positive financial returns, the paper looked at