Short and Distort
84 Pages Posted: 27 Jun 2018 Last revised: 20 Feb 2020
Date Written: February 13, 2020
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: Suggested Citation