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Market manipulation with sentiment traders

Qingduo Zeng, Shancun Liu, Yi Qu and Qiang Zhang

Applied Economics Letters, 2018, vol. 25, issue 4, 239-243

Abstract: This article offers a new perspective for traders’ sentiment by bridging the relationship between feedback effect and market manipulation. Allowing access to information regarding manipulated orders confuses sentiment traders, leading to an overestimation of the true asset value which actually remains the same. We find that sentiment factor has a nonmonotonic impact on the responsiveness to order information and price informativeness. Furthermore, it is shown that informed traders behave like a contrarian, and can use order information to reassess the price, which results in the multiplicity of equilibria.

Date: 2018
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Handle: RePEc:taf:apeclt:v:25:y:2018:i:4:p:239-243