Short and Distort

81 Pages Posted: 27 Jun 2018 Last revised: 3 Feb 2019

Date Written: January 10, 2019

Abstract

Pseudonymous attacks on public companies are followed by stock price declines and sharp reversals. I find these patterns are likely driven by manipulative stock options trading by pseudonymous authors. Among 1,720 pseudonymous attacks on mid- and large-cap firms from 2010-2017, I identify over $20.1 billion of mispricing. Reputation theory suggests these reversals persist because pseudonymity allows manipulators to switch identities without accountability. Using stylometric analysis, I show that pseudonymous authors exploit the perception that they are trustworthy, only to switch identities after losing credibility with the market.

Keywords: finance, law, trading, short, distort, manipulation

JEL Classification: G14, K22

Suggested Citation

Mitts, Joshua, Short and Distort (January 10, 2019). Columbia Law and Economics Working Paper No. 592. Available at SSRN: https://ssrn.com/abstract=3198384 or http://dx.doi.org/10.2139/ssrn.3198384

Joshua Mitts (Contact Author)

Columbia Law School ( email )

435 West 116th Street
New York, NY 10025
United States

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