NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Andreas Hackethal

Goethe University Frankfurt
Grüneburgplatz 1 House of Finance
60323 Frankfurt a.M. Germany

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NBER Working Papers and Publications

November 2017Who Falls Prey to the Wolf of Wall Street? Investor Participation in Market Manipulation
with Christian Leuz, Steffen Meyer, Maximilian Muhn, Eugene Soltes: w24083
Manipulative communications touting stocks are common in capital markets around the world. Although the price distortions created by so-called “pump-and-dump” schemes are well known, little is known about the investors in these frauds. By examining 421 “pump-and-dump” schemes between 2002 and 2015 and a proprietary set of trading records for over 110,000 individual investors from a major German bank, we provide evidence on the participation rate, magnitude of the investments, losses, and the characteristics of the individuals who invest in such schemes. Our evidence suggests that participation is quite common and involves sizable losses, with nearly 6% of active investors participating in at least one “pump-and-dump” and an average loss of nearly 30%. Moreover, we identify several distinct...
 
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