Detecting Pump Dump Stock Market Manipulation from Online Forums
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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 regulators that a pump dump may be underway.
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