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Posted by M Laavanya, Year 3 undergrad at the School of Accountancy, Singapore Management University

Stock Market Manipulation on the Hong Kong Stock Exchange.

Gerace, Dionigi¹ Chew, Charles² Whittaker, Christopher³ Mazzola, Paul¹

Australasian Accounting Business & Finance Journal. 2014, Vol. 8 Issue 4, p105-140. 36p.

Abstract:

This study is the first to empirically examine stock market manipulation on the Hong Kong Stock Exchange. The dataset contains 40 cases of market manipulation from 1996 to 2009 that were successfully prosecuted by the Hong Kong Securities & Futures Commission. Manipulation is found to negatively impact market efficiency measures such as the bid-ask spread and volatility. Markets appear incapable of efficiently responding to the presence of manipulators and are characterised by information asymmetry. Manipulators were successfully able to raise prices and exit the market. This finding contradicts views that trade-based manipulation is entirely unprofitable and self-deterring. The victimisation of information-seeking investors and the market as a whole provides a strong rationale for all jurisdictions, including Australia, to have effective laws that prohibit manipulation and for robust enforcement of those laws to further deter market manipulation

The Manipulator’s Poker: Order-Based Manipulation in the Chinese Stock Market.

Kong, Dongmin¹ Wang, Maobin²

Emerging Markets Finance & Trade. Mar/Apr2014, Vol. 50 Issue 2, p73-98. 26p.

Abstract:

This paper investigates order-based manipulation and its effects on investor behavior and market efficiency. Using a unique data set from the Chinese stock market, we show that (1) order-based manipulation affects market liquidity and trading behavior, (2) the manipulator pretends to be informed or expects to be seen as informed by choosing a “right” time to implement the manipulation, and (3) the manipulation rapidly changes investor reaction to the market order/depth imbalance in the short run, and the effect gradually drops during the postmanipulation period. Our results are robust to alternative measures and offer clear implications for both theory and policy.