| Market manipulation is main illegal behavior in security market. According to《The New Palgrave Dictionary on Money and Finance》, financial market manipulation is such a kind of activities whose aim is to change the security price by some technologies which can cause unnatural market price. Cherian and Jarrow (1995) argued that loosely speaking, when an individual (or a group) makes security price change in the favor of himself by trading securities, market manipulation happens. That is, market manipulation means some power which can affect market price. Market manipulation disturbs the normal operation of security market and makes it difficult for the market to realize its basic functions. Under extreme circumstance, market manipulation can even ruin the market. So how serious is the market manipulation in China security market compared to developed market economies, and what is the reason, and how to solve the problem? It is the purpose and significance of this paper to try to answer these questions. This paper begins with a survey of the related researches, and then deepens into the practical issues with the aid of theoretical analysis. The main body consists four parts whose contents are as following: The first part surveys the related researches both home and abroad , and builds an theoretical frame for this paper. Generally, market manipulation is classified into three kinds: action-based manipulation and information-based manipulation and trade-based manipulation. Since 1980s', foreign economists separately discussed the three kinds of market manipulation from the angle of model building and the possibility of manipulation. Chinese economists also do many valuable works, which cover analysis about law and institution,theoretical model analysis and empirical analysis. The main part of the researches point out that the most important reason for market manipulation is informational asymmetry between different investors. The second part makes an empirical study of market manipulation in China compared to the ones in America. The empirical study contains case study and descriptive statistics of all cases. The conclusion from the comparison is the mode of manipulation is similar, but there is higher frequency of manipulation in China than in America. The third part is the core of this paper. It begins with informational asymmetry, and specializes the kind of informational asymmetry between institutional investors and individual investors in "the cost which institutional investors take to make securities seem 'good'", and then a game model about manipulation between institutional investors and individual investors is presented. The model shows that as long as there is informational asymmetry in security market, there is possibility of market manipulation. As informational asymmetry is a characteristic of security market, market manipulation cannot be forbade completely. This explains why there is still manipulation in developed market economies. For explaining the higher frequency of market manipulation in China compared to developed market economies, this paper takes a further discuss in the effects to the game output (namely the frequency of manipulation) of the certain constraints in China security market. Those certain constraints include over-speculation,unbalance of investors' structure ,imperfection in disclosure of information and loose and unsteady regulation. The model analysis supposes that the constraints mentioned above make manipulation more frequent. So far, we present a possible explanation of the higher frequency of market manipulation in China. The fourth part gives related policy suggestions for relaxing marketmanipulation from the aspect of improving the certain constraints in China security market, based on the analysis above. The suggestions include: relaxing over-speculation by rising the long-term investment value of the securities; respecting market rule and offering legal investment circumstance for all kinds of investors, especially those institutional investors which... |
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