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Unchecked manipulations, price–volume relationship and market efficiency: Evidence from emerging markets

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  • Azad, A.S.M. Sohel
  • Azmat, Saad
  • Fang, Victor
  • Edirisuriya, Piyadasa

Abstract

This paper investigates how unchecked manipulations could cause frequent trade-induced manipulations and weak-form market inefficiency in South Asian stock markets [Bombay Stock Exchange (BSE), Dhaka Stock Exchange (DSE) and Karachi Stock Exchange (KSE)]. Specifically, the paper analyses the price–volume relationship as one of the many cases of market inefficiency. By employing various econometric tests, this paper first provides conclusive evidence of market inefficiency in these markets. It then extracts evidence of manipulation periods from legal cases and analyses price–volume relationship during these periods. The paper finds that there exists market-wide trading-induced manipulations, where excessive buying and selling causes prices to inflate artificially before crashing down. The paper concludes that South-Asian markets are inefficient in the weak-form.

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Bibliographic Info

Article provided by Elsevier in its journal Research in International Business and Finance.

Volume (Year): 30 (2014)
Issue (Month): C ()
Pages: 51-71

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Handle: RePEc:eee:riibaf:v:30:y:2014:i:c:p:51-71

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Web page: http://www.elsevier.com/locate/ribaf

Related research

Keywords: Trade-induced manipulation; Price–volume relationship; Market efficiency; Emerging markets; South Asia;

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References

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  4. Jennings, Robert H & Starks, Laura T & Fellingham, John C, 1981. "An Equilibrium Model of Asset Trading with Sequential Information Arrival," Journal of Finance, American Finance Association, vol. 36(1), pages 143-61, March.
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  21. Chiang, Shu-Mei & Lee, Yen-Hsien & Su, Hsin-Mei & Tzou, Yi-Pin, 2010. "Efficiency tests of foreign exchange markets for four Asian Countries," Research in International Business and Finance, Elsevier, vol. 24(3), pages 284-294, September.
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