Manipulation of Illiquid Asset Indexes

23 Pages Posted: 26 Feb 2016

See all articles by K. Jeremy Ko

K. Jeremy Ko

Upstart

Igor Kozhanov

U.S. Securities and Exchange Commission

Sean Wilkoff

Pennsylvania State University - Smeal College of Business

Date Written: February 24, 2016

Abstract

We develop a model of manipulation of indexes, whose components are illiquid in that they require fair valuation based on comparable instruments. Such an index may be susceptible to manipulation since distorting the prices of only a few assets could potentially shift its value. Our model provides a measure of the manipulability of an index and identifies which assets are most likely to be manipulated. We apply our model to analyze the manipulability of national municipal bond indexes subject to various bond size thresholds.

Keywords: Manipulation, Index, Derivatives, Exchange-traded Funds, Fixed Income, Municipal Bonds, Liquidity, Regulation

JEL Classification: G18, G23, G28

Suggested Citation

Ko, Kwangmin and Kozhanov, Igor and Wilkoff, Sean, Manipulation of Illiquid Asset Indexes (February 24, 2016). Available at SSRN: https://ssrn.com/abstract=2737567 or http://dx.doi.org/10.2139/ssrn.2737567

Kwangmin Ko (Contact Author)

Upstart ( email )

2950 S Delaware St #300
San Mateo, CA 94403
United States
2022570741 (Phone)

Igor Kozhanov

U.S. Securities and Exchange Commission ( email )

Division of Economic and Risk Analysis
100 F St NE
Washington, DC 20549
United States

Sean Wilkoff

Pennsylvania State University - Smeal College of Business ( email )

University Park, PA 16802
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
137
Abstract Views
947
rank
251,055
PlumX Metrics