Forecasting Stock Price Manipulation in Capital Market
The aim of the article is extending and developing
econometrics and network structure based methods which are able to
distinguish price manipulation in Tehran stock exchange. The
principal goal of the present study is to offer model for
approximating price manipulation in Tehran stock exchange. In order
to do so by applying separation method a sample consisting of 397
companies accepted at Tehran stock exchange were selected and
information related to their price and volume of trades during years
2001 until 2009 were collected and then through performing runs
test, skewness test and duration correlative test the selected
companies were divided into 2 sets of manipulated and non
manipulated companies. In the next stage by investigating
cumulative return process and volume of trades in manipulated
companies, the date of starting price manipulation was specified and
in this way the logit model, artificial neural network, multiple
discriminant analysis and by using information related to size of
company, clarity of information, ratio of P/E and liquidity of stock
one year prior price manipulation; a model for forecasting price
manipulation of stocks of companies present in Tehran stock
exchange were designed. At the end the power of forecasting models
were studied by using data of test set. Whereas the power of
forecasting logit model for test set was 92.1%, for artificial neural
network was 94.1% and multi audit analysis model was 90.2%;
therefore all of the 3 aforesaid models has high power to forecast
price manipulation and there is no considerable difference among
forecasting power of these 3 models.
[1] Mei, J., G. Wu, and C. Zhou, Behavior Based Manipulation: Theory and
Prosecution Evidence. NYU Working Paper, 2003.
[2] Jarrow, R.A., Market Manipulation, Bubbles, Corners, and Short
Squeezes. The Journal of Financial and Quantitative Analysis 1992. 27:
p. 311-336.
[3] Allen, F. and D. Gale, Stock-Price Manipulation. The Review of
Financial Studies, 1992. 5(3): p. 503-529.
[4] Aggarwal, R.K. and G. Wu, Stock Market Manipulation - Theory and
Evidence. Working Paper, 2004.
[5] Mahoney, P.G., The stock pools and the Securities Exchange Act.
Journal of Financial Economics, 1999. 51(3): p. 343-369.
[6] Jarrow, R.A., Derivative Security Markets, Market Manipulation, and
Option Pricing Theory. The Journal of Financial and Quantitative
Analysis 1994. 29: p. 241-261.
[7] Merrick, J.J., N.Y. Naik, and P.K. Yadav, Market Quality and Trader
Behavior in a Manipulated Market: Anatomy of a Squeeze. EFA 2002
Berlin Meetings Presented Paper 2002.
[8] Bagnoli, M. and B.L. Lipman, Stock Price Manipulation Through
Takeover Bids. The RAND Journal of Economics 1996. 27: p. 124-147.
[9] Deb, S.S., P.S. Kalev, and V.B. Marisetty, Are price limits really bad for
equity markets? Journal of Banking & Finance. 34(10): p. 2462-2471.
[10] Blume, M., S. Luckner, and C. Weinhardt, Fraud detection in playmoney
prediction markets. Inf Syst E-Bus Manage, 2010. 8: p. 395-413.
[11] Hintermann, B., Market Power, Permit Allocation and Efficiency in
Emission Permit Markets. Environmental and Resource Economics,
2010.
[12] Lo, A.W.Y., R.M.K. Wong, and M. Firth, Can corporate governance
deter management from manipulating earnings? Evidence from relatedparty
sales transactions in China. Journal of Corporate Finance, 2010.
16: p. 225-235.
[13] Takayama, S., A dynamic strategy of the informed trader with market
manipulation. Ann Finance, 2010. 6: p. 287-294.
[14] Comerton-Forde, C. and T.J. Putninš, Pricing accuracy, liquidity and
trader behavior with closing price manipulation. Experimental
Economics, 2011. 14: p. 110-131.
[15] Comerton-Forde, C. and T.J. Putnins, Measuring closing price
manipulation. Journal of Financial Intermediation, 2011. 20(2): p. 135-
158.
[16] Palshikar, G.K. and M.M. Apte, Collusion set detection using graph
clustering. Data Min Knowl Disc, 2008. 16: p. 135-164.
[17] Garvey, G.T., S. Grant, and S.P. King, Talking down the firm: Shortterm
market manipulation and optimal management compensation.
International Journal of Industrial Organization, 1998. 16(5): p. 555-570.
[18] Hanke, M. and F. Hauser, On the effects of stock spam e-mails. Journal
of Financial Markets, 2008. 11(1): p. 57-83.
[19] Hanson, R., R. Oprea, and D. Porter, Information aggregation and
manipulation in an experimental market. Journal of Economic Behavior
& Organization, 2006. 60(4): p. 449-459.
[20] Cai, B.M., C.X. Cai, and K. Keasey, Which trades move prices in
emerging markets?: Evidence from China's stock market. Pacific-Basin
Finance Journal, 2006. 14(5): p. 453-466.
[21] Khwaja, A.I. and A. Mian, Unchecked intermediaries: Price
manipulation in an emerging stock market. Journal of Financial
Economics, 2005. 78(1): p. 203-241.
[22] Chakraborty, A. and B. Yilmaz, Informed manipulation. Journal of
Economic Theory, 2004. 114(1): p. 132-152.
[23] Chan, K., N. Jegadeesh, and T. Sougiannis, The Accrual Effect on
Future Earnings. Review of Quantitative Finance and Accounting, 2004.
22: p. 97-121.
[24] Palumbo, G., Optimal duplication of effort in advocacy systems. Journal
of Economic Behavior & Organization, 2006. 60(1): p. 112-128.
[25] Gersbach, H. and M. M├╝ller, Flexible pensions for politicians. Public
Choice, 2010. 145: p. 103-124.
[26] Sartzetakis, E.S., Raising Rivals- Costs Strategies via Emission Permits
Markets. Review of Industrial Organization, 1997. 12: p. 751-765.
[27] Knetsch, J.L., F.-F. Tang, and R.H. Thaler, The Endowment Effect and
Repeated Market Trials:Is the Vickrey Auction Demand Revealing?
Experimental Economics, 2001. 4: p. 257-269.
[28] Ruiz-Conde, E., P.S.H. Leeflang, and J. E.Wieringa, Marketing variables
in macro-level diffusion models. Journal f├╝r Betriebswirtschaft, 2006.
56: p. 155-183.
[29] Holley, D., Market Manipulation - The Focus on Prevention. Heinonline,
1993.
[1] Mei, J., G. Wu, and C. Zhou, Behavior Based Manipulation: Theory and
Prosecution Evidence. NYU Working Paper, 2003.
[2] Jarrow, R.A., Market Manipulation, Bubbles, Corners, and Short
Squeezes. The Journal of Financial and Quantitative Analysis 1992. 27:
p. 311-336.
[3] Allen, F. and D. Gale, Stock-Price Manipulation. The Review of
Financial Studies, 1992. 5(3): p. 503-529.
[4] Aggarwal, R.K. and G. Wu, Stock Market Manipulation - Theory and
Evidence. Working Paper, 2004.
[5] Mahoney, P.G., The stock pools and the Securities Exchange Act.
Journal of Financial Economics, 1999. 51(3): p. 343-369.
[6] Jarrow, R.A., Derivative Security Markets, Market Manipulation, and
Option Pricing Theory. The Journal of Financial and Quantitative
Analysis 1994. 29: p. 241-261.
[7] Merrick, J.J., N.Y. Naik, and P.K. Yadav, Market Quality and Trader
Behavior in a Manipulated Market: Anatomy of a Squeeze. EFA 2002
Berlin Meetings Presented Paper 2002.
[8] Bagnoli, M. and B.L. Lipman, Stock Price Manipulation Through
Takeover Bids. The RAND Journal of Economics 1996. 27: p. 124-147.
[9] Deb, S.S., P.S. Kalev, and V.B. Marisetty, Are price limits really bad for
equity markets? Journal of Banking & Finance. 34(10): p. 2462-2471.
[10] Blume, M., S. Luckner, and C. Weinhardt, Fraud detection in playmoney
prediction markets. Inf Syst E-Bus Manage, 2010. 8: p. 395-413.
[11] Hintermann, B., Market Power, Permit Allocation and Efficiency in
Emission Permit Markets. Environmental and Resource Economics,
2010.
[12] Lo, A.W.Y., R.M.K. Wong, and M. Firth, Can corporate governance
deter management from manipulating earnings? Evidence from relatedparty
sales transactions in China. Journal of Corporate Finance, 2010.
16: p. 225-235.
[13] Takayama, S., A dynamic strategy of the informed trader with market
manipulation. Ann Finance, 2010. 6: p. 287-294.
[14] Comerton-Forde, C. and T.J. Putninš, Pricing accuracy, liquidity and
trader behavior with closing price manipulation. Experimental
Economics, 2011. 14: p. 110-131.
[15] Comerton-Forde, C. and T.J. Putnins, Measuring closing price
manipulation. Journal of Financial Intermediation, 2011. 20(2): p. 135-
158.
[16] Palshikar, G.K. and M.M. Apte, Collusion set detection using graph
clustering. Data Min Knowl Disc, 2008. 16: p. 135-164.
[17] Garvey, G.T., S. Grant, and S.P. King, Talking down the firm: Shortterm
market manipulation and optimal management compensation.
International Journal of Industrial Organization, 1998. 16(5): p. 555-570.
[18] Hanke, M. and F. Hauser, On the effects of stock spam e-mails. Journal
of Financial Markets, 2008. 11(1): p. 57-83.
[19] Hanson, R., R. Oprea, and D. Porter, Information aggregation and
manipulation in an experimental market. Journal of Economic Behavior
& Organization, 2006. 60(4): p. 449-459.
[20] Cai, B.M., C.X. Cai, and K. Keasey, Which trades move prices in
emerging markets?: Evidence from China's stock market. Pacific-Basin
Finance Journal, 2006. 14(5): p. 453-466.
[21] Khwaja, A.I. and A. Mian, Unchecked intermediaries: Price
manipulation in an emerging stock market. Journal of Financial
Economics, 2005. 78(1): p. 203-241.
[22] Chakraborty, A. and B. Yilmaz, Informed manipulation. Journal of
Economic Theory, 2004. 114(1): p. 132-152.
[23] Chan, K., N. Jegadeesh, and T. Sougiannis, The Accrual Effect on
Future Earnings. Review of Quantitative Finance and Accounting, 2004.
22: p. 97-121.
[24] Palumbo, G., Optimal duplication of effort in advocacy systems. Journal
of Economic Behavior & Organization, 2006. 60(1): p. 112-128.
[25] Gersbach, H. and M. M├╝ller, Flexible pensions for politicians. Public
Choice, 2010. 145: p. 103-124.
[26] Sartzetakis, E.S., Raising Rivals- Costs Strategies via Emission Permits
Markets. Review of Industrial Organization, 1997. 12: p. 751-765.
[27] Knetsch, J.L., F.-F. Tang, and R.H. Thaler, The Endowment Effect and
Repeated Market Trials:Is the Vickrey Auction Demand Revealing?
Experimental Economics, 2001. 4: p. 257-269.
[28] Ruiz-Conde, E., P.S.H. Leeflang, and J. E.Wieringa, Marketing variables
in macro-level diffusion models. Journal f├╝r Betriebswirtschaft, 2006.
56: p. 155-183.
[29] Holley, D., Market Manipulation - The Focus on Prevention. Heinonline,
1993.
@article{"International Journal of Business, Human and Social Sciences:50269", author = "F. Rahnamay Roodposhti and M. Falah Shams and H. Kordlouie", title = "Forecasting Stock Price Manipulation in Capital Market", abstract = "The aim of the article is extending and developing
econometrics and network structure based methods which are able to
distinguish price manipulation in Tehran stock exchange. The
principal goal of the present study is to offer model for
approximating price manipulation in Tehran stock exchange. In order
to do so by applying separation method a sample consisting of 397
companies accepted at Tehran stock exchange were selected and
information related to their price and volume of trades during years
2001 until 2009 were collected and then through performing runs
test, skewness test and duration correlative test the selected
companies were divided into 2 sets of manipulated and non
manipulated companies. In the next stage by investigating
cumulative return process and volume of trades in manipulated
companies, the date of starting price manipulation was specified and
in this way the logit model, artificial neural network, multiple
discriminant analysis and by using information related to size of
company, clarity of information, ratio of P/E and liquidity of stock
one year prior price manipulation; a model for forecasting price
manipulation of stocks of companies present in Tehran stock
exchange were designed. At the end the power of forecasting models
were studied by using data of test set. Whereas the power of
forecasting logit model for test set was 92.1%, for artificial neural
network was 94.1% and multi audit analysis model was 90.2%;
therefore all of the 3 aforesaid models has high power to forecast
price manipulation and there is no considerable difference among
forecasting power of these 3 models.", keywords = "Price Manipulation, Liquidity, Size of Company,Floating Stock, Information Clarity", volume = "5", number = "8", pages = "928-11", }
