Public information manipulation in the financial market

Bo Wang and Suli Zheng

Finance Research Letters, 2023, vol. 51, issue C

Abstract: Which factor might shape investor’s sentiment in the financial market? We answer this question by introducing information manipulation into the micro-structure of a financial market. In our model, an insider inflates the fundamental to boost the equilibrium market price. Because the manipulation cost is private information, the investors treat the manipulation as a noisy signal, or rather, sentiment. The manipulation turns out to be a linear combination of fundamental and manipulation cost. The equilibrium level of manipulation decreases with market supply elasticity and transparency. Overall, our theory suggests insider’s manipulation as a possible source of market sentiment.

Keywords: Information manipulation; Financial market; Sentiment (search for similar items in EconPapers)
JEL-codes: G14 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:51:y:2023:i:c:s1544612322006390

DOI: 10.1016/j.frl.2022.103463

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