Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/195658 
Authors: 
Year of Publication: 
2017
Citation: 
[Journal:] International Journal of Financial Studies [ISSN:] 2227-7072 [Volume:] 5 [Issue:] 4 [Publisher:] MDPI [Place:] Basel [Year:] 2017 [Pages:] 1-12
Publisher: 
MDPI, Basel
Abstract: 
We model a scenario in which there are three types of investors: fundamentalists, speculators, and trend-followers and an intermediary who cares about his reputation. Fundamentalists are rational investors with long horizons who are interested in the dividend stream. Speculators are rational investors who have short horizons and are interested in profiting from short-term price movements or capital gains. Trend-followers are behavioral investors who extrapolate price trends, and, consequently, are late entrants in the market. We show that an informed intermediary (broker) can manipulate demand (consequently stock price) without losing his reputation when there is information asymmetry. We also show that there is a trade-off between broker level competition for reputation and market liquidity. Broker level competition checks manipulation, but it adversely affects market liquidity.
Subjects: 
stock price manipulation
broker manipulation
broker competition
heterogeneous investors
fundamentalists
speculators
trend-follower
JEL: 
C72
D80
G10
G20
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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