Biblio

In financial markets such as stock markets, securities are traded at a price where supply equals demand. Behind the impediments to the short-selling of stock, most participants in the stock market are buyers, so trades are more probable at higher prices than in situations without such restrictions. However, the order imbalance that occurs when buy orders exceed sell orders can change due to many factors. Hence, it is insufficient to discuss the effects of order imbalance caused by impediments to short-selling on the stock price only through empirical studies. Our study used an artificial market to investigate the effects on traded price and quantity of limit orders. The simulation results revealed that the order imbalance when buy orders exceed sell orders increases the traded price and results in fewer quantities of limit sell orders than limit buy orders. In particular, when the sell/buy ratio of the order imbalance model is less than or equal to 0.9, the limit sell/buy ratio becomes lower than that. Lastly, we investigated the mechanisms of the effects on traded price and quantity of limit orders.

Most financial markets prohibit unfair trades as they reduce efficiency and diminish the integrity of the market. Spoofers place orders they have no intention of trading in order to manipulate market prices and profit illegally. Most financial markets prohibit such spoofing orders; however, further clarification is still needed regarding how many orders a spoofer needs to place in order to manipulate market prices and profit. In this study I built an artificial market model (an agent-based model for financial markets) to show how unbalanced buy and sell orders affect the expected returns, and I implemented the spoofer agent in the model. I then investigated how many orders the spoofer needs to place in order to manipulate market prices and profit illegally. The results indicate that showing more spoofing orders than waiting orders in the order book enables the spoofer to earn illegally, amplifies price fluctuation, and reduces the efficiency of the market.

Social media are increasingly reflecting and influencing the behavior of human and financial market. Cognitive hacking leverages the influence of social media to spread deceptive information with an intent to gain abnormal profits illegally or to cause losses. Measuring the information content in financial social media can be useful for identifying these attacks. In this paper, we developed an approach to identifying social media features that correlate with abnormal returns of the stocks of companies vulnerable to be targets of cognitive hacking. To test the approach, we collected price data and 865,289 social media messages on four technology companies from July 2017 to June 2018, and extracted features that contributed to abnormal stock movements. Preliminary results show that terms that are simple, motivate actions, incite emotion, and uses exaggeration are ranked high in the features of messages associated with abnormal price movements. We also provide selected messages to illustrate the use of these features in potential cognitive hacking attacks.

In recent years, the spreading of malicious social media messages about financial stocks has threatened the security of financial market. Market Anomaly Attacks is an illegal practice in the stock or commodities markets that induces investors to make purchase or sale decisions based on false information. Identifying these threats from noisy social media datasets remains challenging because of the long time sequence in these social media postings, ambiguous textual context and the difficulties for traditional deep learning approaches to handle both temporal and text dependent data such as financial social media messages. This research developed a temporal recurrent neural network (TRNN) approach to capturing both time and text sequence dependencies for intelligent detection of market anomalies. We tested the approach by using financial social media of U.S. technology companies and their stock returns. Compared with traditional neural network approaches, TRNN was found to more efficiently and effectively classify abnormal returns.