Preventing Stock Market Crises (I)
Regulating Shareholding Concentration
Are current secondary stock markets perfectly competitive? We present a unique hand-collected database from securities regulatory agencies that demonstrates stock price manipulation is a frequent and widespread event in the secondary market. Although countries that follow U.S. stock market regulation prohibit market manipulation by law, our findings show that market manipulation remains widespread and frequent in all the stock exchanges in our sample, including the United States, China, India, Japan, and Hong Kong. In-depth analysis of the manipulative objective of each stage of the popular Accumulation-Lift-Distribution scheme leads to the finding of monopolistic pricing in the stock market, similar to predatory pricing in the goods market. Therefore, we conclude that monopoly power is frequently exercised in the stock markets investigated, and this market failure needs to be corrected through additional oversight, monitoring, and regulation. In the spirit of antitrust in the stock market, we recommend three quantifiable and adjustable measures to securities regulators that aim at effectively preventing stock market crises triggered by large shareholding concentration.
Is Perfect Competition Possible in the Stock Market?
Is perfect competition possible? Yes, it is possible. Our series of analysis and regulatory proposals ...