How useful is sample entropy in detecting stock price manipulation in Taiwan?

• Main Authors: Wei-Fan Yeh, 葉偉凡
• Other Authors: Jin-Lung Lin
• Format: Others
• Language: zh-TW
• Published: 2009
• Online Access: http://ndltd.ncl.edu.tw/handle/25939693905388163440

碩士 === 國立東華大學 === 企業管理學系 === 97 === Understanding and detecting market manipulation have long been the most important task for stock market governance and have attracted a great deal of attentions from the academics. Numerous methods and models have been proposed for this purpose. Among them are some recent attempts to use sample entropy (SampEn) to detect stock market manipulation. It is believed that trade-based manipulation introduces more regularity and less randomness into intraday price and volume. SampEn, a similar but less biased measure than the popular approximate entropy, calculates the probability that epochs of window length m that are similar within a tolerance r remain similar at the next point. There are several studies of the usefulness of SampEn in detecting stock market manipulations using data in India and other European countries, and the empirical results are mixed. While some applications show positive evidences but some others don't. This paper examines the applicability of SampEn in detecting stock market manipulation in Taiwan. We have analyzed numerous cases identified as being manipulated by the government officials and the court. Also included are several stock return series for which manipulations are deemed unlikely. To better understand the properties of SampEn, we perform some Monte Carlo simulation experiments with underlying processes ranging from white noise, autoregressive process, random walks, and threshold autoregressive process. Our analysis find significant drop of randomness of stock return at the first and last day of the manipulation period for several cases but there are some exceptions. News events might temporally lower randomness that make detecting manipulation more difficult. To conclude, our empirical analysis and Monte Carlo studies confirm some usefulness of SampEn in detecting manipulation which could become more useful when combining with other methods.