nep-mst New Economics Papers
on Market Microstructure
Issue of 2023‒04‒24
two papers chosen by
Thanos Verousis

  1. Market Manipulation in NFT Markets By Oh, Sebeom
  2. Nash equilibria for relative investors with (non)linear price impact By Nicole B\"auerle; Tamara G\"oll

  1. By: Oh, Sebeom
    Abstract: Non-Fungible Tokens (NFTs) are a new form of digital asset used for fundraising purposes, similar to equity crowdfunding, but within an unregulated environment. The NFT market has been described as an unregulated and prone to misconduct, but there is a lack of detailed analysis on such behaviors. This paper examines the use of manipulative trading, specifically unrevealed insider trading and wash trading, within the NFT market using publicly available transaction data on the Ethereum blockchain. The results show that insiders buying behavior strongly predicts higher future price returns. Even if the circulated USD amount in wash trades is more than 422 million, wash trades fails to impact meaningful market outcomes. I find that some investors engage in wash trading to earn rewards from NFT marketplaces or promote emerging marketplaces in competition with the dominant platform.
    Keywords: Blockchain; NFT; Manipulative Trading; Insider Trading; Wash Trading
    JEL: G14 G28
    Date: 2023–03–22
  2. By: Nicole B\"auerle; Tamara G\"oll
    Abstract: We consider the strategic interaction of $n$ investors who are able to influence a stock price process and at the same time measure their utilities relative to the other investors. Our main aim is to find Nash equilibrium investment strategies in this setting in a financial market driven by a Brownian motion and investigate the influence the price impact has on the equilibrium. We consider both CRRA and CARA utility functions. Our findings show that the problem is well-posed as long as the price impact is at most linear. Moreover, numerical results reveal that the investors behave very aggressively when the price impact is beyond a critical parameter.
    Date: 2023–03

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