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Detecting Pump&Dump Stock Market Manipulation from Online Forums (arxiv.org)
2 points by PaulHoule on Jan 31, 2023 | hide | past | pdf | discuss on HN

In plain words: They gathered stocks whose prices and trading spiked in the pump-and-dump pattern along with forum posts timed to the jumps, then trained models to spot schemes from the posts' wording. The best reached 85% accuracy and a 62% F1 score, balancing catches against false alarms.

Abstract

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%. Such a tool can provide early warning to investors and regulators that a pump&dump may be underway.

D. Nam, D. B. Skillicorn
arXiv:2301.11403 · cs.SI, cs.CL, cs.LG · submitted Jan 26, 2023
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