Media trading groups and short selling manipulation

This paper models how chatroom traders, forming a coalition via social media platforms, influence the stock price in the presence of large and strategic short sellers. The economic consequences of this dynamic game are studied in an equilibrium framework with strategic trading. Various equilibrium p...

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Bibliographic Details
Published inQuantitative finance Vol. 23; no. 7-8; pp. 1035 - 1052
Main Authors Jarrow, Robert, Li, Siguang
Format Journal Article
LanguageEnglish
Published Bristol Routledge 03.08.2023
Taylor & Francis Ltd
Subjects
Allocational efficiency
Belief-neutral efficiency
Market manipulation
Media trading groups
Meme stocks
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Summary:This paper models how chatroom traders, forming a coalition via social media platforms, influence the stock price in the presence of large and strategic short sellers. The economic consequences of this dynamic game are studied in an equilibrium framework with strategic trading. Various equilibrium phenomena arise, including price bubbles, short squeezes, forced liquidations, and precautionary savings by the large trader. Media groups discipline the large trader's incentive to short sell, but it can either increase or decrease market allocational efficiency. Additionally, it uniformly improves social welfare under the belief-neutral welfare criterion.
ISSN:1469-7688
1469-7696
DOI:10.1080/14697688.2023.2222751