Pricing accuracy, liquidity and trader behavior with closing price manipulation

Comerton-Forde, C; Putniņš, TJ

Pricing accuracy, liquidity and trader behavior with closing price manipulation

Comerton-Forde, C Putniņš, TJ

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Publication Type:: Journal Article
Citation:: Experimental Economics, 2011, 14 (1), pp. 110 - 131
Issue Date:: 2011-03-01

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Field	Value	Language
dc.contributor.author	Comerton-Forde, C	en_US
dc.contributor.author	Putniņš, TJ https://orcid.org/0000-0001-5731-499X	en_US
dc.date.issued	2011-03-01	en_US
dc.identifier.citation	Experimental Economics, 2011, 14 (1), pp. 110 - 131	en_US
dc.identifier.issn	1386-4157	en_US
dc.identifier.uri	http://hdl.handle.net/10453/18830
dc.description.abstract	We study the effects of closing price manipulation in an experimental market to evaluate the social harm caused by manipulation. We find that manipulators, given incentives similar to many actual manipulation cases, decrease price accuracy and liquidity. The mere possibility of manipulation alters market participants' behavior, leading to reduced liquidity. We find evidence that ordinary traders attempt to profitably counteract manipulation. This study provides examples of the strategies employed by manipulators, illustrates how these strategies change in the presence of detection penalties and assesses the ability of market participants to identify manipulation. © 2010 Economic Science Association.	en_US
dc.relation.ispartof	Experimental Economics	en_US
dc.relation.isbasedon	10.1007/s10683-010-9259-z	en_US
dc.subject.classification	Economics	en_US
dc.title	Pricing accuracy, liquidity and trader behavior with closing price manipulation	en_US
dc.type	Journal Article
utslib.citation.volume	1	en_US
utslib.citation.volume	14	en_US
utslib.for	1505 Marketing	en_US
utslib.for	1402 Applied Economics	en_US
utslib.for	1502 Banking, Finance and Investment	en_US
utslib.for	1401 Economic Theory	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Faculty of Business/Finance Discipline
utslib.copyright.status	open_access
pubs.declined	1970-01-01T00:00:00.0+1000
pubs.issue	1	en_US
pubs.publication-status	Published	en_US
pubs.volume	14	en_US

Abstract:

We study the effects of closing price manipulation in an experimental market to evaluate the social harm caused by manipulation. We find that manipulators, given incentives similar to many actual manipulation cases, decrease price accuracy and liquidity. The mere possibility of manipulation alters market participants' behavior, leading to reduced liquidity. We find evidence that ordinary traders attempt to profitably counteract manipulation. This study provides examples of the strategies employed by manipulators, illustrates how these strategies change in the presence of detection penalties and assesses the ability of market participants to identify manipulation. © 2010 Economic Science Association.

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http://hdl.handle.net/10453/18830