Market manipulation with sentiment traders |
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Authors: | Qingduo Zeng Shancun Liu Yi Qu |
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Institution: | 1. School of Economics and Management, Beihang University, Beijing, China;2. School of Computer Science, University of Nottingham, Nottingham, UK |
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Abstract: | This article offers a new perspective for traders’ sentiment by bridging the relationship between feedback effect and market manipulation. Allowing access to information regarding manipulated orders confuses sentiment traders, leading to an overestimation of the true asset value which actually remains the same. We find that sentiment factor has a nonmonotonic impact on the responsiveness to order information and price informativeness. Furthermore, it is shown that informed traders behave like a contrarian, and can use order information to reassess the price, which results in the multiplicity of equilibria. |
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Keywords: | Sentiment feedback effect rational expectation equilibrium multiple equilibria |
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