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Manipulation

What is 'Manipulation'

Manipulation is the act of artificially inflating or deflating the price of a security. In most cases, manipulation is illegal. It is much easier to manipulate the share price of smaller companies, such as penny stocks, because they are not as closely watched by analysts as the medium- and large-sized firms.

Also known as "price manipulation."

Explaining 'Manipulation'

One way people can deflate the price of a security is by placing hundreds of small orders at a significantly lower price than the one at which it has been trading. This gives investors the impression that there is something wrong with the company, so they sell, pushing the prices even lower. Another example of manipulation would be to place simultaneous buy and sell orders through different brokers that cancel each other out but give the perception, because of the higher volume, that there is increased interest in the security.


Further Reading


Discussion write-offs: Manipulation or impairment?
www.jstor.org [PDF]
… For example, the papers for this session do not cite a single paper from economics or strategy journals and … WRITE-OFFS: MANIPULATION OR IMPAIRMENT … has incentives to manipulate earnings through these write-offs, but dis- tinguishing between these hypotheses with the …

Market manipulation and corporate finance: A new perspectiveMarket manipulation and corporate finance: A new perspective
www.jstor.org [PDF]
… For example, the papers for this session do not cite a single paper from economics or strategy journals and … WRITE-OFFS: MANIPULATION OR IMPAIRMENT … has incentives to manipulate earnings through these write-offs, but dis- tinguishing between these hypotheses with the …

The effect of the mandatory adoption of corporate governance mechanisms on earnings manipulation, management effectiveness and firm financingThe effect of the mandatory adoption of corporate governance mechanisms on earnings manipulation, management effectiveness and firm financing
www.emerald.com [PDF]
… For example, the papers for this session do not cite a single paper from economics or strategy journals and … WRITE-OFFS: MANIPULATION OR IMPAIRMENT … has incentives to manipulate earnings through these write-offs, but dis- tinguishing between these hypotheses with the …

How to define illegal price manipulationHow to define illegal price manipulation
pubs.aeaweb.org [PDF]
… For example, the papers for this session do not cite a single paper from economics or strategy journals and … WRITE-OFFS: MANIPULATION OR IMPAIRMENT … has incentives to manipulate earnings through these write-offs, but dis- tinguishing between these hypotheses with the …

The economics of earnings manipulation and managerial compensationThe economics of earnings manipulation and managerial compensation
onlinelibrary.wiley.com [PDF]
… For example, the papers for this session do not cite a single paper from economics or strategy journals and … WRITE-OFFS: MANIPULATION OR IMPAIRMENT … has incentives to manipulate earnings through these write-offs, but dis- tinguishing between these hypotheses with the …

Manipulation and equity-based compensationManipulation and equity-based compensation
pubs.aeaweb.org [PDF]
… For example, the papers for this session do not cite a single paper from economics or strategy journals and … WRITE-OFFS: MANIPULATION OR IMPAIRMENT … has incentives to manipulate earnings through these write-offs, but dis- tinguishing between these hypotheses with the …

On the Corporate Governance, Fund Appropriation and Earning Manipulation <span style=[J]' src='/thumbnails/?img=http%3A%2F%2Fen.cnki.com.cn%2FArticle_en%2FCJFDTotal-JRYJ200905014.htm' />On the Corporate Governance, Fund Appropriation and Earning Manipulation [J]
en.cnki.com.cn [[J]' href='https:/api.miniature.io/pdf?url=en.cnki.com.cn%2FArticle_en%2FCJFDTotal-JRYJ200905014.htm'>PDF]
… For example, the papers for this session do not cite a single paper from economics or strategy journals and … WRITE-OFFS: MANIPULATION OR IMPAIRMENT … has incentives to manipulate earnings through these write-offs, but dis- tinguishing between these hypotheses with the …

GOVERNMENT MANIPULATION OF CONSTITUTIONAL-LEVEL TRANSACTION COSTS: AN ECONOMIC THEORY AND ITS APPLICATION TO OFF-BUDGET …GOVERNMENT MANIPULATION OF CONSTITUTIONAL-LEVEL TRANSACTION COSTS: AN ECONOMIC THEORY AND ITS APPLICATION TO OFF-BUDGET …
elibrary.ru [PDF]
… For example, the papers for this session do not cite a single paper from economics or strategy journals and … WRITE-OFFS: MANIPULATION OR IMPAIRMENT … has incentives to manipulate earnings through these write-offs, but dis- tinguishing between these hypotheses with the …

Price manipulation by intermediariesPrice manipulation by intermediaries
www.tandfonline.com [PDF]
… For example, the papers for this session do not cite a single paper from economics or strategy journals and … WRITE-OFFS: MANIPULATION OR IMPAIRMENT … has incentives to manipulate earnings through these write-offs, but dis- tinguishing between these hypotheses with the …

Trading-based Market Manipulation in China's Stock Market <span style=[J]' src='/thumbnails/?img=http%3A%2F%2Fen.cnki.com.cn%2FArticle_en%2FCJFDTotal-JJYJ200510006.htm' />Trading-based Market Manipulation in China's Stock Market [J]
en.cnki.com.cn [[J]' href='https:/api.miniature.io/pdf?url=en.cnki.com.cn%2FArticle_en%2FCJFDTotal-JJYJ200510006.htm'>PDF]
… For example, the papers for this session do not cite a single paper from economics or strategy journals and … WRITE-OFFS: MANIPULATION OR IMPAIRMENT … has incentives to manipulate earnings through these write-offs, but dis- tinguishing between these hypotheses with the …



Q&A About Manipulation


Why would someone want to artificially inflate or deflate a stock's price?

To make money on short sales (selling stocks you don't own). If you believe a stock will go down, you borrow shares from your broker and immediately sell them for whatever price they're currently trading for (the current market value), then wait until after hours when no one else is around and buy back those same shares for less than what you sold them for earlier (the new market value) and return them to your broker who returns your loaned shares back to their rightful owner thus making money on short sales without ever owning any actual stock!

What is manipulation?

Manipulation is the act of artificially inflating or deflating the price of a security.

What does "artificially" mean in this context?

Artificial means fake or false. In this context it means faking an interest in a security to make others think there's something wrong with it so they will sell their shares too.

How do people deflate share prices?

People can deflate share prices by placing hundreds of small orders at a significantly lower price than the one at which it has been trading. This gives investors the impression that there is something wrong with the company, so they sell, pushing the prices even lower. Another example would be to place simultaneous buy and sell orders through different brokers that cancel each other out but give the perception, because of higher volume, that there is increased interest in the security.

Is manipulation illegal?

Yes!

Who can manipulate prices?

It is much easier to manipulate prices of smaller companies because they are not as closely watched by analysts as medium- and large-sized firms.

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