Stock Market Manipulation on the Hong Kong Stock Exchange

Abstract

This study is the first to empirically examine stock market manipulation on the Hong Kong Stock Exchange. The dataset contains 40 cases of market manipulation from 1996 to 2009 that were successfully prosecuted by the Hong Kong Securities & Futures Commission. Manipulation is found to negatively impact market efficiency measures such as the bid-ask spread and volatility. Markets appear incapable of efficiently responding to the presence of manipulators and are characterised by information asymmetry. Manipulators were successfully able to raise prices and exit the market. This finding contradicts views that trade-based manipulation is entirely unprofitable and self-deterring. The victimisation of information-seeking investors and the market as a whole provides a strong rationale for all jurisdictions, including Australia, to have effective laws that prohibit manipulation and for robust enforcement of those laws to further deter market manipulation.

A new method of measuring stock market manipulation through structural equation modeling (SEM)

“…In general, excess return is defined as any risk adjusted return that is above the return suggested by a pricing model, i.e., CAPM. A study of 40 incidences of stock market manipulation in Hong Kong Stock Exchange revealed the relationship between market manipulation and artificially generated excess return (Gerace et al, 2014). Excess return certainly can be caused by other non-manipulative reasons and is not always an indication of manipulation, however, is a major candidate for being one of the observable indicators in our model.…”

Untitled

“…Gerace, Chew, Whittaker and Mazzola (2014) examine the impact of stock market manipulation on the HKSE. The authors recommend deterrence of such manipulation through stronger enforcement.…”

Stock market manipulation: A comparative analysis of East Asian emerging and developed financial markets

“…(CFA Institute, 2015). Therefore, market manipulation is an important issue to detect and prevent across all of the financial markets including the US and the European and the emerging markets (Aggarwal & Wu, 2003;Cumming et al, 2015;Gerace et al, 2014;Imisiker & Tas, 2013;Khwaja & Mian, 2005;Lee et al, 2013;Mei et al, 2004;Öğüt et al, 2009;Punniyamoorthy & Joy Thoppan, 2012).…”