The Integrity of Closing Prices

Forthcoming, The Handbook of Financial Market Manipulation and Fraud, (Wiley) Edited by Carol Alexander and Douglas Cumming

27 Pages Posted: 13 Nov 2018

See all articles by Ryan J. Davies

Ryan J. Davies

Babson College - Finance Division

Date Written: October 20, 2018

Abstract

I examine three research themes related to the potential manipulation of closing prices. First, I examine the incentives for mutual fund and hedge fund managers to inflate the closing prices of their existing holdings by trading near the close on the last trading day of key performance measurement periods, such as the end of the quarter and the end of the year. Second, I examine how other financial intermediaries reacted to a well-documented alleged manipulation in which a portfolio manager repeatedly used “bang-the-close” trades to influence the settlement prices of commodity futures contracts. Third, I examine potential manipulation of closing stock prices on equity option expiration dates. I conclude with a discussion of regulatory implications and recent market design issues.

Keywords: painting the tape, portfolio pumping, stock pinning, collusion

JEL Classification: G14, G18, G23

Suggested Citation

Davies, Ryan J., The Integrity of Closing Prices (October 20, 2018). Forthcoming, The Handbook of Financial Market Manipulation and Fraud, (Wiley) Edited by Carol Alexander and Douglas Cumming , Available at SSRN: https://ssrn.com/abstract=3270362

Ryan J. Davies (Contact Author)

Babson College - Finance Division ( email )

220 Tomasso Hall
Babson Park, MA 02457-0310
United States
781-239-5345 (Phone)
781-239-5004 (Fax)

HOME PAGE: http://faculty.babson.edu/rdavies/

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