Detecting Pump&Dump Stock Market Manipulation from Online Forums

• URL: http://arxiv.org/abs/2301.11403v1
• Date: Thu, 26 Jan 2023 20:31:27 GMT
• Title: Detecting Pump&Dump Stock Market Manipulation from Online Forums
• Authors: D. Nam and D.B. Skillicorn
• Abstract summary: Manipulators accumulate small-cap stocks, disseminate false information on social media to inflate their price, and sell at the peak. We collect a dataset of stocks whose price and volume profiles have the characteristic shape of a pump&dump. We build predictive models for pump&dump events based on the language used in the social media posts.
• Score: 0.0
• License: http://creativecommons.org/licenses/by/4.0/
• Abstract: The intersection of social media, low-cost trading platforms, and naive investors has created an ideal situation for information-based market manipulations, especially pump&dumps. Manipulators accumulate small-cap stocks, disseminate false information on social media to inflate their price, and sell at the peak. We collect a dataset of stocks whose price and volume profiles have the characteristic shape of a pump&dump, and social media posts for those same stocks that match the timing of the initial price rises. From these we build predictive models for pump&dump events based on the language used in the social media posts. There are multiple difficulties: not every post will cause the intended market reaction, some pump&dump events may be triggered by posts in other forums, and there may be accidental confluences of post timing and market movements. Nevertheless, our best model achieves a prediction accuracy of 85% and an F1-score of 62%. Such a tool can provide early warning to investors and regulators that a pump&dump may be underway.

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