Over on the ASX by stock threads there has been some interesting posts on market manipulation.
Always ask yourself when a stranger on HC offers a tip, chart or information, why, and what do they gain. Often it is your money. They have sowed the seed for you to research and act on a stock.
Regulars see pump and dumps all the time. Increased number of positive posts, ramping, etc, the stock runs up in price, then the price dives and the losers post about where the hype went. Happens especially on low M/C, and high number of shares on issue.
Please find attached some interesting reading. ============================================
Taken from the NKP forum.
Our model of manipulation occurs in a setting where the manipulator inflates the stock price in the absence of good news. Our analysis of manipulation cases shows that inflating the stock price is indeed the most common type of manipulation. Figure 1 displays the breakdown of manipulation types. 84.51% of manipulation cases involve the inflation of stock prices
Manipulators often try to create an artificially high price through [wash trades] and the use of nominee accounts (40.14% of our cases involve such trades). They trade among accounts owned by essentially the same individual or group.
We argue that the increased trading volume and price often attract the attention of investors or information seekers. Indeed,for our entire sample of manipulated stocks, the mean daily average turnover during manipulation periods is about 20% higher than that for non-manipulation periods. In these cases, it is plausible [that investors believe there is good news about the stock, without realizing that much of the trading activity does not involve any real change in ownership.]
Since information seekers constantly search for investment opportunities, manipulators often resort to propagating false information to encourage information seekers to purchase shares. For our entire sample, 55.63% of all cases involve the spread of rumors. Historically, manipulators have colluded with newspaper columnists and stock promoters to spread false information. With the advent of the Internet, chat rooms and message bulletin boards have become popular means to distribute false information. From January 2000 to October 2001, about 39% of all manipulation cases involved the use of the Internet to spread rumors.
