Stock Price Manipulation: Prevalence and Determinants

Forthcoming, Review of Finance

54 Pages Posted: 21 Aug 2008 Last revised: 11 Oct 2012

See all articles by Carole Comerton-Forde

Carole Comerton-Forde

UNSW Business School; Financial Research Network (FIRN)

Tālis J. Putniņš

University of Technology Sydney (UTS); Stockholm School of Economics, Riga

Date Written: October 4, 2012

Abstract

We empirically analyze the prevalence and economic underpinnings of closing price manipulation and its detection. We estimate that approximately one percent of closing prices are manipulated, of which only a small fraction is detected and prosecuted. We find that stocks with high levels of information asymmetry and mid to low levels of liquidity are most likely to be manipulated. A significant proportion of manipulation occurs on month/ quarter-end days. Manipulation on these days is more likely in stocks with high levels of institutional ownership. Government regulatory budget has a strong effect on both manipulation and detection.

Keywords: manipulation, prosecution, closing price, high-closing, detection controlled estimation

JEL Classification: G14

Suggested Citation

Comerton-Forde, Carole and Putnins, Talis J., Stock Price Manipulation: Prevalence and Determinants (October 4, 2012). Forthcoming, Review of Finance. Available at SSRN: https://ssrn.com/abstract=1243042 or http://dx.doi.org/10.2139/ssrn.1243042

Carole Comerton-Forde

UNSW Business School ( email )

UNSW Business School
High St
Sydney, NSW 2052
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Talis J. Putnins (Contact Author)

University of Technology Sydney (UTS) ( email )

PO Box 123
Broadway
Sydney
Australia
+61 2 9514 3088 (Phone)

Stockholm School of Economics, Riga ( email )

Strelnieku iela 4a
Riga, LV 1010
Latvia
+371 67015841 (Phone)

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