"Since stock price movements are fundamental to damages calculations, lower 'estimated damages' may stem from the reduced stock price volatility during the years when many of these cases were filed," said report coauthor Laura Simmons, a senior adviser in Cornerstone Research's Washington office. "And, as the market has remained relatively stable on the whole in 2013 and 2014, it suggests that this trend of lower 'estimated damages' for settled cases may continue."

What is contributing to the trend? According to Professor Joseph A. Grundfest, director of the Stanford Law School Securities Class Action Clearinghouse, the class action securities fraud market appears to be shrinking, whether measured in terms of the size of settlements or in the severity of new actions filed.  "It may also mean that public pensions could have fewer large cases to draw them into the lead plaintiff role," said Grundfast.

The report also examines "estimated damages," the most important factor in predicting settlement amounts. Average "estimated damages" decreased 60% from 2013 and were 70% lower than in 2012.

According to Cornerstone Research, "estimated damages" are a simplified calculation of potential shareholder losses used for the purposes of this research, and are not intended to be indicative of alleged economic damages incurred by shareholders.

In addition to lower average "estimated damages," a smaller proportion of large cases involved third-party defendants and public pensions as lead plaintiffs, which contributed to the decrease in settlement amounts. Both of these factors are typically associated with higher settlements.

Not only did public pensions participate in fewer settlements in 2014, but their typical association with cases involving larger market capitalization losses, higher numbers of docket entries prior to settlement, accompanying derivative actions, and corresponding SEC actions did not hold in 2014.