The Impact of Manipulation in Internet Stock Message Boards
International Journal of Banking and Finance, Forthcoming
19 Pages Posted: 3 Nov 2009 Last revised: 5 Aug 2014
Date Written: November 1, 2009
Internet message boards are often used to spread information in order to manipulate financial markets. Although this hypothesis is supported by many cases reported in the literature and in the media, the real impact of manipulation in online forums on financial markets remains an open question. This work analyses the effect of manipulation in internet stock message boards on financial markets. We employ a unique corpus of moderated messages to investigate market manipulation. Internet message boards administrators use the process of moderation to restrict market manipulation. From the data we find that manual supervision of stock message boards by moderators does not effectively protect users against manipulation. Furthermore, by focusing on messages that have been moderated as manipulative due to ramping we show that ramping is positively related to market returns, volatility and volume. We also demonstrate that stocks with higher turnover, lower price level, lower market capitalization and higher volatility are more common targets of ramping.
Keywords: Ramping, Market Manipulation, Internet Stock Message Boards, Event Study
JEL Classification: D82, G14, G22
Suggested Citation: Suggested Citation