New Economics Papers
on Market Microstructure
Issue of 2007‒08‒14
one paper chosen by
Thanos Verousis

  1. Stock price manipulation: The role of intermediaries By Siddiqi, Hammad

  1. By: Siddiqi, Hammad
    Abstract: We model stock price manipulation when the manipulator is in the role of an intermediary (broker). We find that in the absence of superior information, the broker can manipulate equilibrium outcomes without losing its credibility with respect to accurate forecasting. The result extends to the case when the broker prefers more investment to come into the market. However, when moderate competition among brokers is introduced then the investors get their favorite outcome. When competition exceeds a certain threshold, neither the brokers nor the investors get their respective favorite outcomes. In any case, if the broker bias for more investment dominates competition, the brokers get their favorite outcome at the expense of investors.
    Keywords: Stock Price Manipulation; Broker Manipulation; Broker Competition; Broker Bias; Emerging Markets
    JEL: G20 G10 C72 D82
    Date: 2007–07

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