Stock Price Manipulation: The Role of Intermediaries

Hammad Siddiqi

doi:10.3390/ijfs5040024

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Stock Price Manipulation: The Role of Intermediaries

Journal article

Open access

Peer reviewed

Stock Price Manipulation: The Role of Intermediaries

Hammad Siddiqi

International Journal of Financial Studies, Vol.5(4), pp.1-12

2017

DOI: https://doi.org/10.3390/ijfs5040024

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Abstract

Banking, Finance and Investment

stock price manipulation

broker manipulation

broker competition

heterogeneous investors

fundamentalists

speculators

trend-follower

We model a scenario in which there are three types of investors: fundamentalists, speculators, and trend-followers and an intermediary who cares about his reputation. Fundamentalists are rational investors with long horizons who are interested in the dividend stream. Speculators are rational investors who have short horizons and are interested in profiting from short-term price movements or capital gains. Trend-followers are behavioral investors who extrapolate price trends, and, consequently, are late entrants in the market. We show that an informed intermediary (broker) can manipulate demand (consequently stock price) without losing his reputation when there is information asymmetry. We also show that there is a trade-off between broker level competition for reputation and market liquidity. Broker level competition checks manipulation, but it adversely affects market liquidity.

Details

Title: Stock Price Manipulation: The Role of Intermediaries
Authors: Hammad Siddiqi (Author) - University of Queensland
Publication details: International Journal of Financial Studies, Vol.5(4), pp.1-12; 12
Publisher: MDPI AG
Date published: 2017
DOI: 10.3390/ijfs5040024
ISSN: 2227-7072
Copyright note: This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).
Organisation Unit: School of Business and Creative Industries; University of the Sunshine Coast, Queensland; USC Business School - Legacy
Language: English
Record Identifier: 99450671002621
Output Type: Journal article

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