Wash Trades as a Stock Market Manipulation Tool

Imisiker, S. and Tas, B.K.O., 2018. Wash trades as a stock market manipulation tool. Journal of Behavioral and Experimental Finance, 20, pp.92-98.

30 Pages Posted: 8 Aug 2014 Last revised: 10 Jan 2019

See all articles by Serkan Imisiker

Serkan Imisiker

no affiliation; Independent

Bedri Kamil Onur Tas

TOBB University of Economics and Technology - Department of Economics; Economic Research Forum (ERF)

Date Written: March 7, 2016

Abstract

This study empirically investigates the profitability of one of the most widely used trade-based manipulation tools, namely the wash trading. Using a unique account level dataset over the 2003-2006 period from the Istanbul Stock Exchange (ISE), we generate a measure for usage of wash sales for each individual account and check whether dealing with wash trading provides any excess return for the investors. Empirical results reveal that significant number of investors perform wash sales and having up to 30% of the total trades as wash sales provides excess profit whereas using up to 10% is the most profitable range with a 0.5% monthly excess return. Consistent with previous studies, trade-based manipulation is commonly seen at illiquid segment of the stock market, but on the other hand our results show that wash trading is profitable for the most liquid stocks while not for the most illiquid segment.

Keywords: trade based manipulation, wash sales, market structure

JEL Classification: G11, G14, G20

Suggested Citation

Imisiker, Serkan and Imisiker, Serkan and Tas, Bedri Kamil Onur, Wash Trades as a Stock Market Manipulation Tool (March 7, 2016). Imisiker, S. and Tas, B.K.O., 2018. Wash trades as a stock market manipulation tool. Journal of Behavioral and Experimental Finance, 20, pp.92-98., Available at SSRN: https://ssrn.com/abstract=2476874 or http://dx.doi.org/10.2139/ssrn.2476874

Serkan Imisiker

Independent ( email )

no affiliation ( email )

Istanbul
Istanbul
Istanbul, Istanbul 34100
Turkey

Bedri Kamil Onur Tas (Contact Author)

TOBB University of Economics and Technology - Department of Economics ( email )

Sogutozu Cad. No:43 Sogutozu
Ankara, 06560
Turkey

HOME PAGE: http://onurtas.weebly.com

Economic Research Forum (ERF) ( email )

21 Al-Sad Al-Aaly St.
(P.O. Box: 12311)
Dokki, Cairo
Egypt

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