Detecting Pump &Dump stock market manipulation from online forums

D. Nam () and D. B. Skillicorn ()
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D. Nam: Queen’s University
D. B. Skillicorn: Queen’s University

Digital Finance, 2025, vol. 7, issue 1, No 1, 20 pages

Abstract: Abstract The intersection of social media, low-cost trading platforms, and naive investors has created an ideal situation for information-based market manipulations, especially pump &dumps. Manipulators accumulate small-cap stocks, disseminate false information on social media to inflate their price, and sell at the peak. We collect a dataset of stocks whose price and volume profiles have the characteristic shape of a pump &dump, and social media posts for those same stocks that match the timing of the initial price rises. From these we build predictive models for pump &dump events based on the language used in the social media posts. There are multiple difficulties: not every post will cause the intended market reaction, some pump &dump events may be triggered by posts in other forums, and there may be accidental confluences of post timing and market movements. Nevertheless, our best model achieves a prediction accuracy of 85% and an F1-score of 62%. Such a tool can provide early warning to investors and regulators that a pump &dump may be underway.

Keywords: Market manipulation; Social media (search for similar items in EconPapers)
JEL-codes: C25 C45 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s42521-024-00121-4

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