Price Manipulation by Dissemination of Rumors: Evidence from the Indonesian Stock Market

Dewa Gede Wirama, I Gusti Bagus Wiksuana, Zuraidah Mohd-Sanusi and Soheil Kazemian
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Dewa Gede Wirama: Fakultas Ekonomi Universitas Udayana, Bali, Indonesia,
I Gusti Bagus Wiksuana: Fakultas Ekonomi Universitas Udayana, Bali, Indonesia
Zuraidah Mohd-Sanusi: Accounting Research Institute, Universiti Teknologi MARA, Malaysia,
Soheil Kazemian: Accounting Research Institute, Universiti Teknologi MARA, Malaysia.

International Journal of Economics and Financial Issues, 2017, vol. 7, issue 1, 429-434

Abstract: This study examines stock market reactions to the publication of rumors in Indonesia market. Using 672 market rumors published in the electronic version of the Investor Daily Indonesia newspaper for the period starting from 3August 2007 to 31 December 2008, this research shows that market rumors were intentionally published by sellers to attract buyers. They are a part of a manipulation scheme that is intended to enable the manipulator to sell at higher prices stocks that they previously accumulated at lower prices. The findings of this research indicate that the stock market is not fully efficient as prices could be manipulated by rumors. Consequently, the existence of market rumors should be considered in timing the buy and sell decision. Regulators might also want to put into effect stronger regulation against spreading false information to protect the small and usually less informed investors.

Keywords: Rumor; Market Manipulation; Abnormal Return; Investment Decision; Regulation (search for similar items in EconPapers)
JEL-codes: G01 G14 G15 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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