Stock market manipulation in an emerging market of Turkey: how do market participants select stocks for manipulation?

ABSTRACT

We obtained a unique dataset that covers all trade-based manipulation events identified by the Capital Market Board (CMB) for the period between 2005 and 2013 in order to investigate stock market manipulation and its implications on market quality. Moreover, we examine how manipulators decide which stocks to select for manipulation in an emerging market. We observe that the manipulators select illiquid, underperforming, and less volatile stocks to manipulate in an emerging market. We also demonstrate that stock liquidity, return, and volatility increase throughout the manipulation period and decrease in the post-manipulation period, leading to a deterioration of market quality.

KEYWORDS:

• Stock price manipulation
• market efficiency
• emerging markets
• Turkey

JEL CLASSIFICATION:

• G14
• G18
• K22

Disclosure statement

This paper is derived from Dr. Hilal Ok Ergün MSc thesis done in 2016 at Social Sciences Institute in Eskisehir Osmangazi University, Turkey.

Notes

¹ We implement a benchmark pool of 99 non-manipulated stocks. According to the CMB, all 99 benchmark stocks did not encounter manipulation during our sample period.