Death, Destruction, and Manipulation

57 Pages Posted: 15 Dec 2020 Last revised: 11 Nov 2021

See all articles by Maimuna Akter, PhD

Maimuna Akter, PhD

Gonzaga University - School of Business Administration

Douglas J. Cumming

Florida Atlantic University; European Corporate Governance Institute (ECGI)

Shan Ji

Capital Markets CRC

Date Written: October 18, 2020

Abstract

We propose during periods of natural disasters, there is greater scope for the frequency and severity of market manipulation due to distraction and investor misestimations. For the population of US stocks from 2007-2018, we merge intra-day manipulation data from SMARTS, Inc., and CMCRC with National Oceanic and Atmospheric Administration's National Weather Service data. The data indicate that market manipulation is common, and the trading value surrounding the manipulation is pronounced among firms that are headquartered in disaster zones. We show these effects are not mechanically driven by spikes in volatility in disaster county-months. We further examine industry-specific effects, which show more pronounced effects in intuitive ways; for example, crop and property damages enhance manipulation in agricultural sectors, while deaths enhance manipulation in health and manufacturing sectors. These findings are robust to alternative proxies of manipulation and to controls for firms’ information asymmetry and volatility. We also use various model specifications that include but are not limited to using Difference-in-Differences analysis.

Keywords: Market Manipulation, Natural Disasters

JEL Classification: G14, G18, Q54

Suggested Citation

Akter, Maimuna and Cumming, Douglas J. and Ji, Shan, Death, Destruction, and Manipulation (October 18, 2020). Available at SSRN: https://ssrn.com/abstract=3714192 or http://dx.doi.org/10.2139/ssrn.3714192

Maimuna Akter (Contact Author)

Gonzaga University - School of Business Administration ( email )

Spokane, WA
United States

Douglas J. Cumming

Florida Atlantic University ( email )

777 Glades Rd
Boca Raton, FL 33431
United States

HOME PAGE: http://sites.google.com/view/douglascumming/bio?authuser=0

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://https://ecgi.global/users/douglas-cumming

Shan Ji

Capital Markets CRC ( email )

GPO Box 970
55 Harrington Street
Sydney, NSW 2001
Australia
+61280884237 (Phone)

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