Stock manipulation and its effects: pump and dump versus stabilization

Stock manipulation and its effects: pump and dump versus stabilization This study examines the manipulation of stock prices in Taiwan stock markets. Using a new set of hand-collected data, we examine the characteristics and patterns of manipulated stocks and their effects on the market. Our results show that manipulated firms tend to be small and to have poor corporate governance. Most manipulation cases involve a “pump-and-dump” trading strategy and stabilization operations. Pump-and-dump manipulations lead to high temporary price impacts, increased volatility, large trading volumes, short-term price continuation, and long-term price reversals during the manipulation period. They therefore have an important impact on market efficiency. In stabilization cases, the manipulation has no impact on market performance, except that the price drop and abnormal returns of the post-manipulation period are significantly lower than during the pre-manipulation period. Firm fundamentals are important in deciding the price impacts of stock manipulation. Compared with manipulated firms with positive fundamentals, the manipulation of firms with negative fundamentals has a more detrimental effect on market efficiency. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Quantitative Finance and Accounting Springer Journals

Stock manipulation and its effects: pump and dump versus stabilization

Loading next page...
 
/lp/springer_journal/stock-manipulation-and-its-effects-pump-and-dump-versus-stabilization-EYgMGzWS6T
Publisher
Springer Journals
Copyright
Copyright © 2013 by Springer Science+Business Media New York
Subject
Economics / Management Science; Finance/Investment/Banking; Accounting/Auditing; Econometrics; Operations Research/Decision Theory
ISSN
0924-865X
eISSN
1573-7179
D.O.I.
10.1007/s11156-013-0419-z
Publisher site
See Article on Publisher Site

Abstract

This study examines the manipulation of stock prices in Taiwan stock markets. Using a new set of hand-collected data, we examine the characteristics and patterns of manipulated stocks and their effects on the market. Our results show that manipulated firms tend to be small and to have poor corporate governance. Most manipulation cases involve a “pump-and-dump” trading strategy and stabilization operations. Pump-and-dump manipulations lead to high temporary price impacts, increased volatility, large trading volumes, short-term price continuation, and long-term price reversals during the manipulation period. They therefore have an important impact on market efficiency. In stabilization cases, the manipulation has no impact on market performance, except that the price drop and abnormal returns of the post-manipulation period are significantly lower than during the pre-manipulation period. Firm fundamentals are important in deciding the price impacts of stock manipulation. Compared with manipulated firms with positive fundamentals, the manipulation of firms with negative fundamentals has a more detrimental effect on market efficiency.

Journal

Review of Quantitative Finance and AccountingSpringer Journals

Published: Nov 24, 2013

References

You’re reading a free preview. Subscribe to read the entire article.


DeepDyve is your
personal research library

It’s your single place to instantly
discover and read the research
that matters to you.

Enjoy affordable access to
over 18 million articles from more than
15,000 peer-reviewed journals.

All for just $49/month

Explore the DeepDyve Library

Search

Query the DeepDyve database, plus search all of PubMed and Google Scholar seamlessly

Organize

Save any article or search result from DeepDyve, PubMed, and Google Scholar... all in one place.

Access

Get unlimited, online access to over 18 million full-text articles from more than 15,000 scientific journals.

Your journals are on DeepDyve

Read from thousands of the leading scholarly journals from SpringerNature, Elsevier, Wiley-Blackwell, Oxford University Press and more.

All the latest content is available, no embargo periods.

See the journals in your area

DeepDyve

Freelancer

DeepDyve

Pro

Price

FREE

$49/month
$360/year

Save searches from
Google Scholar,
PubMed

Create lists to
organize your research

Export lists, citations

Read DeepDyve articles

Abstract access only

Unlimited access to over
18 million full-text articles

Print

20 pages / month

PDF Discount

20% off