Stock manipulation and its effects: pump and dump versus stabilization

Yu Huang () and Yao Cheng ()

Review of Quantitative Finance and Accounting, 2015, vol. 44, issue 4, 815 pages

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. Copyright Springer Science+Business Media New York 2015

Keywords: Stock manipulation; Market performance; Pump and dump; Stabilization; G14; G15; G18 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

Downloads: (external link)
http://hdl.handle.net/10.1007/s11156-013-0419-z (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:rqfnac:v:44:y:2015:i:4:p:791-815

Ordering information: This journal article can be ordered from
http://www.springer.com/finance/journal/11156/PS2

DOI: 10.1007/s11156-013-0419-z

Access Statistics for this article

Review of Quantitative Finance and Accounting is currently edited by Cheng-Few Lee

More articles in Review of Quantitative Finance and Accounting from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().