The Stock Market Research, Market Manipulation Based On The Noise Trading

There are numerous investors in the real security market, including principalshareholders and senior managers of listed companies, institutional investors andsmall investors and so on. Focusing on prices of securities, they play the game.According to the explanation of the classical finance theory, the security price reflectsthe information on basic value of the security. However, in the real security market,the information on security basic value is asymmetrical. As the principal shareholdersand senior managers of listed companies, who have the advantage to obtain theprivate information on basic value of the companies' securities. But as the smallinvestor, who have the disadvantage to obtain the information.Under the condition of the asymmetrical information, the investors who havethis information advantage will hide the true information, driving by the more benefit.They will use trading to manipulate the stock price, and achieve the purpose ofmaking noises and misleading the small investors, then obtain more manipulationprofits for themselves. Security regulatory authorities of every States treat the marketmanipulation as the important part of their works. Because of the hidden nature of themarket manipulation-based on noise trading, it has been the hard task of the securitiessupervision. Therefore, it will have great theoretical value and practical significancefor the study on the features of market manipulation-based on noise trading, andproviding security regulatory authorities the theoretical support and policy advices toavoid such market manipulation.This paper systematically studied the market manipulation-based onnoise-trading, in the framework of the noise-trading research paradigm.The main structure of this paper could be divided into three main parts: the firstpart, is the chapters of theoretical basis for research. We firstly introduced relatedbackground and theory of the noise-trading research paradigm, then summarized thebasic concepts and theoretical research of the noise-trading and market manipulation,which is focusing on the necessary expansion about concept of noise-trading anddetailed classification of noise-trading. This work will provide preparation for thenext stage of theoretical research.The second part, is the chapters of the core model. Through introducing theVitale model, this part pointed out the rationality and the inherent errors of the Vitalemodel, and reconstruction Vitale models. Through research and analysis of newmodels, this paper studied in-depth on which environmental factors in the marketproviding a hotbed for market manipulation and the interest relationship betweendifferent investors under the market manipulation, and finally drew four conclusions.On the basis of model above, this paper pointed out the wealth change of the differentmarket participants under the market manipulation, through data simulation.The third part, is the chapters of policy advices and conclusions. Be supportedby the theory and models above, and combined with empirical analysis, this paperprovided policy advices and specific measures for the securities regulatory authoritieshow to prevent market manipulation, such as strengthening the information disclosuresystem and investors rational education and so on.The study of this paper found that strength of small and medium-sized investors'feedback effects is a prerequisite for the manipulators to actualize the manipulationstrategy. It is the medium and small investors' irrational investment strategy whichprovided hotbeds for market manipulation. Therefore, in order to prevent marketmanipulation in the long run, we needed to provide the investment education forinvestors to form a stable and rational investor team, so as to achieve stability of thesecurities market and the most optimized allocation of security market resourcesMeanwhile, the strength of the desires of insider dealers to arbitrage is theimportant factors on the implementation of market manipulation. There is theincentive compatible relationship between insider dealers and market manipulators.Therefore, in order to prevent market manipulation behaviors, we need to strengthenthe supervision on the shareholders and senior manager of listed companies,particularly the supervision on their transaction accounts.There is a optimal border when depending on market manipulation based onnoise-trading for the purpose of lower prices and increase security storage or raiseprice and reduce security storage. Once over the optimal border, there is trade-offbetween the market prices and security storage. The market manipulators could lowerthe price at the cost of reducing their security storage, and increase the securitystorage at the cost of the higher market price. This also means there is a optimalborder when depending on market manipulation behavior based on noise-trading,once over the border, the cost would be high for the further market manipulation.That's the reason why market manipulation behaviors often take "hybrid" marketmanipulation in the real market.Finally, the study found that in the relatively strong irrational stock market,institutional investors as the relatively rational one can effectively overcome themarket. Therefore, the introduction of institutional investors could enhance therational ingredient of market, increase the relative cost of market manipulation, andachieve purposes of avoiding market manipulation.The innovation of this paper is reflected in two aspects. Firstly, the paper madethe concept of noise-trading clearly, and expanded the outreach of noise-trading,while classified the noise-trading in details.Secondly, in the framework of The Vitale model, the paper studied the marketmanipulation based on noise-trading in the security market, and reconstruction a newmodel fitting the features consistent with the domestic security market, and drewsome useful conclusions. Through the data simulation, the paper also demonstratedthe model is accord with the actual situation of China's security market.