Just after Christmas, I did an entry looking at how the subprime crisis had driven a big increase in securities lawsuits. The NERA Economic Consulting's semi-annual benchmark study showed the 2007 federal filings are projected to increase by 58 per cent compared to the previous year.

Now we have further confirmation of the trend with the 2007 Year in Review Securities Fraud Class Action Filings Report from the stanford university Law School Securities Class Action Clearinghouse, and Cornerstone Research.

Actually, this piece of research raises more questions than answers. On one hand, it shows a 43 per cent increase in lawsuits in 2007, from 116 the year before to 166. And like the NERA research, this study showed that subprime is driving a lot of it. According to the research, 47 finance companies were sued in 2007, more than quadrupling 2006's 11 filings and 25 of the finance sector filings were associated with subprime market disclosure issues.

Another interesting point is that so-called disclosure dollar losses increased 190 percent from 2006, from $52 billion to $151 billion. Add that to the the 128 per cent increase in so-called maximum dollar losses which rose from $293 billion in 2006 to $669 billion in 2007. In other words, the payouts are getting bigger.

The research also showed a correlation between stock market volatility and litigation.

On the other hand, litigation activity for 2007 as a whole was 14 per cent below the ten-year historical average. Still, the subprime mortage meltdown had an effect with lawsuits jumping in the second half.

So what do we make of all this?

Stanford Law School's Professor Jospeh Grundfest says the figures still indicate there's less fraud with increased federal enforcement activity and better monitoring from boards and auditors. "The 2007 litigation rate was below historical norms, even in the face of the subprime crisis,'' Professor Grundfest said.

Still, he conceded it would take several years worth of data before we can confirm it's due to less fraud.

Still, the study raises a number of questions. With the subprime crisis set to continue well into this year, what's the likelihood of another increase in lawsuits? And how do you separate market volatility from the subprime meltdown? If this study is anything to by, the answers are not clear.