The analysis of manipulations in eqity market: An application in İstanbul Stock exchange

Capital markets, an indicator of economic developments in countries, perform an important function for economic units that have various purposes in the short and long term within the financial system with respect to canalizing their savings into efficient areas. Undoubtedly, it is necessary to maintain a transparent, reliable, efficient, fair, and competitive environment within the markets in order to perform this function properly for the sake of protecting the rights and interests of market participants. However, the existence of malevolent attempts, which are observed from time to time, damages not only the stability of the capital markets but also the public confidence. The aim of this study is to reveal the effects of manipulative attempts on stocks observed in a capital market, which is a significant element of the financial system. Within this context, this study analyzed the effects of the trade based manipulation observed in stock markets on the financial rates, stock returns, volatility and turnover rate in the period between the years 2000 and 2014. More specifically, financial rates that influence the probability of trade-based manipulation were analyzed by panel probit method, the effects of trade-based manipulation on the stock returns were analyzed by event study method, and finally the effects of manipulation on stock returns, trading volume, volatility, and turnover rate were analyzed through multiple logistic regression method within the framework of the index in which the stock has been traded. Besides the fact that the results obtained revealed strong evidence for the effects of trade-based manipulation on stock returns, volatility, trading volume, and turnover rate, they also put forward important results with respect to financial statements posing considerable results about the levels of tendency of the companies trading in capital markets towards trade-based manipulation. The results also provide a different view for individual and corporate investors operating in markets, and market regulatory authorities, and for future studies with regards to identifying the trade-based manipulation and its effects.