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Stock Price Manipulation : The Role of Intermediaries

Author

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  • Hammad Siddiqi

    (LUMS)

Abstract

We set out to study 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 a favored outcome. When competition exceeds a certain threshold, neither the brokers nor the investors get their respective favored outcomes. In any case, if the broker bias for more investment dominates competition, the brokers get their favorite outcome at the expense of investors.

Suggested Citation

  • Hammad Siddiqi, 2007. "Stock Price Manipulation : The Role of Intermediaries," Finance Working Papers 22280, East Asian Bureau of Economic Research.
  • Handle: RePEc:eab:financ:22280
    as

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    File URL: http://www.eaber.org/node/22280
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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.

    More about this item

    Keywords

    Stock Price Manipulation; Broker Manipulation; Broker Competition; Broker Bias; Emerging Markets;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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