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Stock Price Manipulation: The Role of Intermediaries

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  • 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 credibility with respect to accurate forecasting. This result extends to the case when the broker prefers more investment to come into the market. However, when competition among brokers is introduced then the investors get their favorite outcome in the absence of superior information. This result has important implications for encouraging broker competitions in developing markets. Many developing markets are still not demutualized; hence broker level competition is limited in such markets.

Suggested Citation

  • Siddiqi, Hammad, 2007. "Stock Price Manipulation: The Role of Intermediaries," MPRA Paper 6374, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:6374
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    References listed on IDEAS

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    Cited by:

    1. Hanjoon Michael Jung, 2008. "Paradox of Credibility," Microeconomics Working Papers 22267, East Asian Bureau of Economic Research.
    2. Tariq, Yasir Bin & Abbas, Zaheer, 2013. "Compliance and multidimensional firm performance: Evaluating the efficacy of rule-based code of corporate governance," Economic Modelling, Elsevier, vol. 35(C), pages 565-575.

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    More about this item

    Keywords

    Stock Price Manipulation; Broker Manipulation; Broker Competition; Broker Bias; Emerging Markets; Market Microstructure;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance

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