Trading Behavior on Expiration Days and Quarter-End Days: The Effect of a New Closing Method

Huang, Yu Chuan; Chan, Shu Hui

doi:10.2753/ree1540-496x460407

Cited by 10 publications

(2 citation statements)

References 27 publications

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“…Frieder and Zittrain (2007) and Hanke and Hauser (2008) presented empirical evidence of the effectiveness of spam e-mails in the pump-and-dump schemes involving stocks traded on the Pink Sheets. Hillion and Suominen (2004) discussed the possibility of manipulators' taking advantage of some specific trading mechanisms to manipulate the stock price, and Huang and Chan (2010) used the Taiwan data to provide empirical evidence.…”

Section: Related Literaturementioning

confidence: 99%

The Manipulator's Poker: Order-Based Manipulation in the Chinese Stock Market

Kong

Wang

2014

Emerging Markets Finance and Trade

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This paper investigates order-based manipulation and its effects on investor behavior and market efficiency. Using a unique data set from the Chinese stock market, we show that (1) order-based manipulation affects market liquidity and trading behavior, (2) the manipulator pretends to be informed or expects to be seen as informed by choosing a "right" time to implement the manipulation, and (3) the manipulation rapidly changes investor reaction to the market order/depth imbalance in the short run, and the effect gradually drops during the postmanipulation period. Our results are robust to alternative measures and offer clear implications for both theory and policy.KEY WORDS: depth imbalance, order-based manipulation, order imbalance, spoofing order.The traditional definition of spoofing involves the display and prompt withdrawal of a large quote or order with the intention of triggering a market movement from which a market participant may benefit by trading on the contra-side (i.e., buying at an unduly low price created as a result of a flash quote to sell, and vice versa). Recently, the definition of spoofing has been broadened to include any placement of an order or quote to be displayed for the purpose of gaining improper market advantage.Manipulation in stock markets has fascinated practitioners and academics for a long time, probably for as long as stock markets have existed. Identifying manipulation is also important for regulators, since manipulation interferes with the free forces of supply and demand and undermines the integrity of prices, investor confidence, and market justice. However, due to a lack of empirical data, most academic papers focus on theoretical models, and there are rarely studies on real-world manipulation (e.g., Aggarwal

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Section: Related Literaturementioning

confidence: 99%

The Manipulator's Poker: Order-Based Manipulation in the Chinese Stock Market

Kong

Wang

2014

Emerging Markets Finance and Trade

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“…In contrast, several studies, for example, Lin et al (2007), Luo and Li (2008), Sarno and Taylor (1999), and Singh (2003), argue that foreign investment is a source of market instability and volatility in addition to boosting stock prices in the short term. In particular, Huang and Chan (2010) find that foreign institutions attempt to influence closing prices of Taiwanese stocks on the expiration days of index futures. To determine the advantages and drawbacks of a foreign investment deregulation policy, a thorough examination of stock market price movements is clearly required.…”

Section: Downloaded By [New York University] At 19:04 01 June 2015mentioning

confidence: 99%

The Effects of Abolishing a Foreign Institutional Investment Quota in Taiwan

Chen

Huang

Chen

2011

Emerging Markets Finance and Trade

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Policies regarding the globalization of financial markets have long been investigated with conflicting results. This paper employs an event study approach with the EGARCH process to examine the effects of lifting restrictions on qualified foreign institutional investors in the Taiwanese stock market. The empirical results indicate significant differences in the behavior of stock returns in the electronics, financial, and other nonfinancial sectors, both on and after the abolition of Taiwan's investment quota. In addition, the volatility of stock returns in the electronics sector increases following the event. Foreign ownership provides some additional explanatory power for electronics and other nonfinancial stocks in the short run.

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