Stock Price Manipulation: The Role of Intermediaries

Hammad A. Siddiqi ()

MPRA Paper from University Library of Munich, Germany

Abstract: We model stock price manipulation when the manipulator is in the role of an intermediary (broker). We find that in the absence of superior information, the broker can manipulate equilibrium outcomes without losing credibility with respect to accurate forecasting. This result extends to the case when the broker prefers more investment to come into the market. However, when competition among brokers is introduced then the investors get their favorite outcome in the absence of superior information. This result has important implications for encouraging broker competitions in developing markets. Many developing markets are still not demutualized; hence broker level competition is limited in such markets.

Keywords: Stock Price Manipulation; Broker Manipulation; Broker Competition; Broker Bias; Emerging Markets; Market Microstructure (search for similar items in EconPapers)
JEL-codes: G1 G2 G3 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mic and nep-mst
Date: 2007-12
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Working Paper: Stock Price Manipulation: The Role of Intermediaries (2007)
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