Pricing accuracy, liquidity and trader behavior with closing price manipulation

Carole Comerton-forde, Tālis Putniņš

Research output: Contribution to journalArticlepeer-review


We study the effects of closing price manipulation in an experimental market to evaluate the social harm caused by manipulation. We find that manipulators, given incentives similar to many actual manipulation cases, decrease price accuracy and liquidity. The mere possibility of manipulation alters market participants’ behavior, leading to reduced liquidity. We find evidence that ordinary traders attempt to profitably counteract manipulation. This study provides examples of the strategies employed by manipulators,illustrates how these strategies change in the presence of detection penalties and assesses the ability of market participants to identify manipulation.
Original languageEnglish
Pages (from-to)110-131
JournalExperimental Economics
Issue number1
Publication statusPublished - 27 Oct 2010


  • manipulation
  • closing price
  • high-closing
  • experimental market


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