Detection of Stock Price Manipulation using Linear and Quadratic Discriminant Analysis

Subject Areas : Financial Knowledge of Securities Analysis

M. Hossein  Poustfroush ¹ (دانش‌آموخته کارشناسی ارشد حسابداری دانشگاه آزاد اسلامی واحد یزد)
Alireza  Naser Sadrabadi ² (استادیار دانشگاه یزد)
Mahmood  Moeinaddin ³ (استادیار و عضو هیات علمی دانشگاه آزاد اسلامی، واحد یزد)

Received: 2014-08-11 Accepted : 2014-12-22 Published : 2016-04-03

Keywords: Market Price Manipulation, Linear Discriminant Analysis, Quadratic Discriminant Analysi,

Abstract :

In this study, Discriminant Analysis (DA) model are used to estimate manipulation of stock prices in Tehran Stock Exchange. In this study, first by using screening data method, a sample of 345 companies listed in Tehran Stock Exchange were selected and then information about the 'TEDPIX' index, closing price, volatility of closing price and trading volume in the time frame years 1387 to 1391 were collected. Afterwards the selected companies categorized into manipulated and non-manipulated groups by using duration dependence test and skewness & kurtosis test. Then with scrutiny of the trend of Tedpix's chart and volume chart of the manipulated group, Start of price manipulation is determined. In next step by using Linear Discriminant Function (LDF) and Quadratic Discriminant Function (QDF) and by using closing price, volatility of closing price and trading volume variables and also using information in range one year before starting manipulation group and in range four years for non-manipulation group, designed models for forecasting manipulation. At the end, the prediction ability of the models was examined. According to the results, the prediction ability of LDF model is 56% and the prediction ability of QDF model is 73%.

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