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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/26571
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| Title: | Large Investors, Price Manipulation, and Limits to Arbitrage: An Anatomy
of Market Corners |
| Authors: | Allen, Franklin
Litov, Lubomir
Mei, JianPing |
| Issue Date: | 30-Dec-2004 |
| Series/Report no.: | FIN-04-038 |
| Abstract: | Using a novel hand-collected data set we investigate price and trading
behavior around several well-known stock market and commodity corners
which occurred between 1863 and 1980. We find strong evidence that large
investors and corporate insiders possess market power that allowed them
to manipulate prices. Manipulation leading to a market corner tends to
increase market volatility and has an adverse price impact on other
assets. We also find that the presence of large investors makes it
extremely risky for would-be short sellers to trade against the
mispricing. Therefore, regulators and exchanges need to be concerned
about ensuring that corners do not take place since they are accompanied
by severe price distortions. |
| URI: | http://hdl.handle.net/2451/26571 |
| Appears in Collections: | Finance Working Papers
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