Market manipulation and suspicious stock recommendations on social media

Market manipulation and suspicious stock recommendations

on social media 


Seminar by Thomas Renault (Université Paris I Panthéon-Sorbonne - Laboratoire PRISM; Catholic University of Lille - IESEG School of Management) 
TBA 

on tuesday, January 9, 2018 at 2:00pm 

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Abstract :

Social media can help investors gather and share information about stock markets. However, it also presents opportunities for fraudsters to spread false or misleading statements in the marketplace. Analyzing millions of messages sent on the social media platform Twitter about small capitalization firms, we find that an abnormally high message activity on social media is associated with a large price increase on the event day and followed by a sharp price reversal over the next week. Examining users' characteristics, we find that the price reversal pattern is stronger when the events are generated by the tweeting activity of deleted/deactivated Twitter accounts, by the tweeting activity of suspicious accounts, or by the tweeting activity of accounts dedicated to tracking pump-and-dump schemes. Overall, our findings are consistent with the patterns of a pump-and-dump scheme, where fraudsters/promoters use social media to temporarily inflate the price of small capitalization stocks.

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