SSRN Home Search and Download Papers Browse Abstract and Paper Submission Subscribe to Networks View Briefcase Top Papers Top Authors Top Institutions

 

Abstract

 
 

References (46)

Beta

 
 

Citations (6)

Beta

 


 


Download | Share | Email | Add to Briefcase | Buy Hard Copy

Large Investors, Price Manipulation, and Limits to Arbitrage: An Anatomy of Market Corners

Franklin Allen
University of Pennsylvania - Finance Department; European Corporate Governance Institute (ECGI)

Lubomir P. Litov
Washington University, St. Louis - John M. Olin School of Business; Financial Institutions Center, Wharton School, University of Pennsylvania

Jianping Mei
New York University - Department of Finance


December 30, 2004


Abstract:     
Using a novel hand-collected data set we investigate price and trading behavior around several well-known stock market and commodity corners which occurred between 1863 and 1980. We find strong evidence that large investors and corporate insiders possess market power that allowed them to manipulate prices. Manipulation leading to a market corner tends to increase market volatility and has an adverse price impact on other assets.

We also find that the presence of large investors makes it extremely risky for would-be short sellers to trade against the mispricing. Therefore, regulators and exchanges need to be concerned about ensuring that corners do not take place since they are accompanied by severe price distortions.

Keywords: limits to arbitrage, manipulation, market corner

JEL Classifications: G10, G14

Working Paper Series

Date posted: January 04, 2005 ; Last revised: May 04, 2008

Suggested Citation

Allen, Franklin, Litov, Lubomir P. and Mei, Jianping, Large Investors, Price Manipulation, and Limits to Arbitrage: An Anatomy of Market Corners (December 30, 2004). Available at SSRN: http://ssrn.com/abstract=604302


Export to: Export Citation What's this?

Contact Information

Franklin Allen (Contact Author)
University of Pennsylvania - Finance Department ( email )
The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States
215-898-3629 (Phone)
215-573-2207 (Fax)
HOME PAGE: http://finance.wharton.upenn.edu/~allenf/
European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels Belgium
HOME PAGE: http://www.ecgi.org
Lubomir P. Litov
Washington University, St. Louis - John M. Olin School of Business ( email )
One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States
HOME PAGE: http://www.olin.wustl.edu/faculty/litov
Financial Institutions Center, Wharton School, University of Pennsylvania ( email )
2306 Steinberg Hall-Dietrich Hall
3620 Locust Walk
Philadelphia, PA 19104
United States
Jianping Mei
New York University - Department of Finance ( email )
Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States
212-998-0354 (Phone)
212-995-4221 (Fax)
Feedback to SSRN (Beta)


Paper statistics
Abstract Views: 1,457
Downloads: 465
Download Rank: 14,025
References: 46
Citations: 6

© 2009 Social Science Electronic Publishing, Inc. All Rights Reserved. Terms of Use  Privacy Policy
This page was served by apollo2 in 0.172 seconds.