2001 might also be related to information-based manipulation.Van Bommel (2003) shows the role of rumors in facilitating prce manipulation. Benabou and Laroque (1992)show that if an opportunistic individual has privileged information and his statements are to certain extent viewed as credible by investors,he can profitably manipulate asset markets through strategically distorted announcements. As privileged information is noisy and learning remains incomplete,opportunistic individuals (corporate officers,financial journalists,or "gurus")can manipulate the market repeatedly,even though their manipulation power is limited in the long run by public's constant reassessment of their credibility.In a related article,John and Narayanan(1997)discuss market manipulation through inside information and the role of insider trading regulations.They show that the existing disclosure rule of the Securities and Exchange Commission (SEC)creates incentives for an informed insider to manipulate the stock market by sometimes trading in wrong direction (i.e.,buying with bad news and selling with good news about the firm).By doing so,the insider can effectively reduce the informativeness of his subsequent trade disclosure because the market is not sure whether an insider's buying (selling)indicates good (bad)news. Consequently,the insider maintains his information superiority for a longer period of time and uses it to reap large profits in later periods by trading in the "right"direction. These profits more than make up for the losses suffered by trading in the wrong direction initially.5 Action-based manipulation is based on actions (other than trading)that change the actual evidence was inconclusive;four days-and a large number of shares-later,the company admitted that deposits had in fact been found.Mahoney (1999),however,question the empirical validity of the existence of manipulation in the 1920s. 3 In addition,Vila(1989)presents an example of information-based manipulation where the manipulator shorts the stock,releases false information and then buys back the stock at a lower price. 66 2001 might also be related to information-based manipulation. Van Bommel (2003) shows the role of rumors in facilitating price manipulation. Benabou and Laroque (1992) show that if an opportunistic individual has privileged information and his statements are to certain extent viewed as credible by investors, he can profitably manipulate asset markets through strategically distorted announcements. As privileged information is noisy and learning remains incomplete, opportunistic individuals (corporate officers, financial journalists, or “gurus”) can manipulate the market repeatedly, even though their manipulation power is limited in the long run by public’s constant reassessment of their credibility. In a related article, John and Narayanan (1997) discuss market manipulation through inside information and the role of insider trading regulations. They show that the existing disclos ure rule of the Securities and Exchange Commission (SEC) creates incentives for an informed insider to manipulate the stock market by sometimes trading in wrong direction (i.e., buying with bad news and selling with good news about the firm). By doing so, the insider can effectively reduce the informativeness of his subsequent trade disclosure because the market is not sure whether an insider’s buying (selling) indicates good (bad) news. Consequently, the insider maintains his information superiority for a longer period of time and uses it to reap large profits in later periods by trading in the “right” direction. These profits more than make up for the losses suffered by trading in the wrong direction initially.5 Action-based manipulation is based on actions (other than trading) that change the actual evidence was inconclusive; four days— and a large number of shares— later, the company admitted that deposits had in fact been found. Mahoney (1999), however, question the empirical validity of the existence of manipulation in the 1920s. 5 In addition, Vila (1989) presents an example of information-based manipulation where the manipulator shorts the stock, releases false information and then buys back the stock at a lower price