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

Jean-Yves Delort

Google Inc.; Capital Markets CRC Limited; Macquarie University

Bavani Arunasalam

Capital Markets CRC Limited; University of Sydney

Maria Milosavljevic

Capital Markets CRC Limited

Henry Leung

University of Sydney Business School; Financial Research Network (FIRN)

Date Written: November 1, 2009

Abstract

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

Delort, Jean-Yves and Arunasalam, Bavani and Milosavljevic, Maria and Leung, Henry, The Impact of Manipulation in Internet Stock Message Boards (November 1, 2009). International Journal of Banking and Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1497883

Jean-Yves Delort (Contact Author)

Google Inc. ( email )

Zurich
Switzerland

Capital Markets CRC Limited ( email )

GPO Box 970
55 Harrington Street
Sydney, NSW 2001
Australia

Macquarie University ( email )

North Ryde
Sydney, New South Wales 2109
Australia

Bavani Arunasalam

Capital Markets CRC Limited ( email )

GPO Box 970
Sydney, NSW, 2001
Australia

University of Sydney ( email )

Sydney, NSW 2006
Australia

Maria Milosavljevic

Capital Markets CRC Limited ( email )

GPO Box 970
55 Harrington Street
Sydney, NSW 2001
Australia

Henry Leung

University of Sydney Business School ( email )

402, H69
The University of Sydney
Sydney, NSW 2006
Australia

Financial Research Network (FIRN)

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

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

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