Electrical Engineering and Computer Science

Other Event

Stock Market Spoofing

Jussi Keppo

Associate Professor
National University of Singapore
Wednesday, November 09, 2016
10:30am - 11:30am
3725 BBB

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About the Event

We use a unique trading dataset of one week from Helsinki Stock Exchange to analyze the behavior of high-frequency traders. About 8% of institutional traders intentionally or unintentionally first enter and then quickly cancel a buy (or sell) limit order without actually buying (or selling) before the trader actually sells (or buys) a security, and 45% of the institutions use this strategy at least once during the week. The total number of executions that are carried out by such a strategy account for about 8% of all the executions of institutional traders for the purpose of proprietary trading. We show that the p-value for testing that this behavior is a random event, and thus unintentional, is extremely small, equal to the probability of observing a 53-standard deviation event. Therefore, most likely the behavior is intentional and an indication of so-called “spoofing”, an attempt to manipulate prices. We show that on average, spoofing raises the return of a one-hour trade by 3 basis points and decreases the return of a three-hour trade against the spoofers by 6 basis points.


Professor Keppo teaches risk management and business analytics courses. He has several publications in the top-tier journals such as Journal of Economic Theory, Review of Economic Studies, Management Science, and Journal of Business on topics such as investment analysis, information economics, and banking regulation. His research has been featured also in numerous business and popular publications, including the Wall Street Journal and Fortune. His research has been supported by several Asian, European, and US agencies such as the National Science Foundation. He serves on the editorial boards of Mathematics of Operations Research, Journal of Risk, Production and Operations Management, and Journal of Energy Markets. He has consulted several Fortune 100 and asset management companies.

Additional Information

Sponsor(s): Strategic Reasoning Group

Open to: Public

Web Page: http://jussikeppo.com/