Day end returns—stock price manipulation

How does the call market method affect price efficiency? Evidence from the Singapore Stock Market

“…Various incentives exist for market participants to manipulate closing prices. Brokers can improve their performance on various measures of execution quality (Felixson and Pelli (1999) and McSherry and Sofianos (1998)), investment managers can improve the appearance of their fund's performance (Carhart et al (2002) When manipulating a closing price, the manipulator is attempting to create a temporary divergence between the market price and intrinsic value of a stock in such a way that the manipulator benefits from the inflated or deflated closing price. To do this, the manipulator attempts to create a short-term liquidity imbalance.…”

The manipulation of closing prices

“…In addition, the frequency of large and aggressive orders, i.e., orders whose limit price and magnitude are such that a trade and a change in the highest bid or lowest ask occurs, was at its highest during the last 10 seconds of trading. 2 Independently, in an empirical paper, Felixson and Pelli (1999) also argued that brokers, or their customers, manipulate the closing prices to show higher trading profits. It has also been argue that there is manipulation near the close on days when derivatives contracts expire.…”

Global Market Surveillance

“…See alsoGerard and Nanda (1992),Felixson and Pelli (1999), Mahoney (1999) andVitale (2000).9 For related work, see LaPorta et al (1997Porta et al ( , 1998Porta et al ( , 1999aPorta et al ( ,b, 2002,Romano (1993Romano ( , 2002,Berkowitz et al (2003), andPistor and Xu (2003).10 A copy of the survey is available upon request from the authors.…”