ABSTRACT
This article offers a new perspective for traders’ sentiment by bridging the relationship between feedback effect and market manipulation. Allowing access to information regarding manipulated orders confuses sentiment traders, leading to an overestimation of the true asset value which actually remains the same. We find that sentiment factor has a nonmonotonic impact on the responsiveness to order information and price informativeness. Furthermore, it is shown that informed traders behave like a contrarian, and can use order information to reassess the price, which results in the multiplicity of equilibria.
Acknowledgement
This work is supported by the National Natural Science Foundation of China [grant numbers 71371023 and 71371024].
Disclosure statement
No potential conflict of interest was reported by the authors.
Notes
1 Alternatively, the manipulators can also submit sell orders.
2 Traders can access order information via social communication. Such information transmission pattern is similar with the work of Han and Yang (Citation2013).