The Effects of Closing Price Manipulation on Stock Price and Trading Volume

Park, Yeong Il; Ahn, Hee Joon; Yeo, Hwan Young

Korean Journal of Financial Studies 2013;42(1):285-321.
Published online February 28, 2013.

Yeong Il Park, Hee Joon Ahn, Hwan Young Yeo

종가시세조종이 주가와 거래량에 미치는 영향

박연길, 안희준, 여환영

Abstract

This study examines the effects of closing price manipulation on stock price and trading volume. It is based on a court case of closing price manipulation by a fund manager that involved 14 stocks (8 KOSPI and 6 KOSDAQ stocks). The manipulation attempts led to significant price increases with the median abnormal returns during the closing call-auction window of 10 minutes being in the range of 0.41 to 0.82 percent for the KOSPI stocks and of 0.55 to 0.86 percent for the KOSDAQ stocks. The manipulation-induced inflation in the stock price was accompanied by a price reversal on the following day with about half of the inflation disappearing during the day. Trading volume also increased significantly during the last 10-minute call-auction period. Unlike our prior expectations, however, no apparent differences are observed in the patterns of abnormal returns and trading volume between the KOSPI and KOSDAQ stocks and between the low and high liquidity stocks. However, the price reversals are more significant and larger with stocks with high turnover than those with low turnover, implying that price efficiency increases with liquidity.

Key Words: 동시호가,수익률역전,종가시세조종,펀드매니저,Call Auction,Closing Price Manipulation,Difference-in-Difference 검정,Difference-in-Difference Test,Fund Manager,Price Reversal