How can econometrics and finance be used to help judges identify stock manipulation

Jin Huei Yeh, Yun Ching Chang, Shan Ying Chu

Research output: Contribution to journalArticlepeer-review


Using the court-sentenced cases dealing with violations of the Anti-Manipulation Clause No. 155 in the Securities Exchange Act of the R.O.C. from 1990 to 2010 as our study sample, we find a variety of disagreement among the judgments, determinations and decisions of the courts at different levels. Such a vast difference of opinions among judges and the verdicts may lead to undesired controversies and disputes in society. It also brings up some implementation issues in the judicial and legal system. Our paper demonstrates that, with help from simple concepts from finance and modern econometrics tools, there is an objective data-driven fact-based approach to identify pump and dump manipulation. The proposed approach is easy to implement, hinges on stock prices only, and can be adaptively updated for ex post identification and ex ante early warning purposes. We believe such a scientific approach based on professional field knowledge has the potential to build up trust and fortify consensus among court judges and the public, thus strengthening the social capital of our society.

Original languageEnglish
Pages (from-to)225-298
Number of pages74
JournalTaiwan Economic Review
Issue number2
StatePublished - 2017


  • Anti-manipulation clause
  • Difference of opinions
  • Efficient market hypothesis
  • Stock price manipulation


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