False Market

DEFINITION of 'False Market'

A market where prices are manipulated and impacted by erroneous information, preventing the efficient negotiation of prices. These types of markets will often be marred by volatile swings because the true value of the market is clouded by the misinformation.

BREAKING DOWN 'False Market'

When investors use inaccurate information to guide their decisions, they tend be irrational and over- or underreact to news. The illogical decisions made by these investors skew the market, causing the true value of a security to be misrepresented

RELATED TERMS
  1. Erroneous Trade

    A stock transaction that deviates so much from the current market ...
  2. Manipulation

    The act of artificially inflating or deflating the price of a ...
  3. Volatility Ratio

    A technical indicator used to identify price ranges and breakouts. ...
  4. Cancellation

    Notice by a broker informing his or her client that an erroneous ...
  5. Price Efficiency

    The premise that asset prices are efficient, to the extent that ...
  6. Painting The Tape

    A form of market manipulation whereby market players attempt ...
Related Articles
  1. Trading

    Market Efficiency Basics

    Market efficiency theory states that a stock’s price will fully reflect all available and relevant information at any given time.
  2. Trading

    Market Speculators: More Help Than Harm

    Speculators often get a bad rap, but it's important to remember that they only observe trends, not manipulate them.
  3. Investing

    Financial Statement Manipulation An Ever-Present Problem For Investors

    The SEC has taken steps to eliminate this type of corporate fraud, but it remains a real risk for investors.
  4. Trading

    The Short and Distort: Stock Manipulation in a Bear Market

    High-quality stock reports needn't be confused with stock manipulators' dramatic claims.
  5. Markets

    Quantitative Easing vs. Currency Manipulation

    In theory, quantitative easing and currency manipulation aren't the same thing, but it's much more difficult to tell one from the other in practice.
  6. Investing

    What Is The Impact Of Research On Stock Prices?

    The answer to this question is directly related to the importance of information in the marketplace.
  7. Investing

    How Financial Statements Are Manipulated

    Financial statement manipulation is an ongoing problem, and investors who buy stocks or bonds should be aware of its signs and implications.
  8. Trading

    Price Volatility Vs. Leverage

    Learn how to effectively gauge the risk of the markets you trade.
  9. Trading

    Swing Trading With Ichimoku Clouds

    Ichimoku Clouds offer complex market analysis in a single visual image that addresses price, trend and momentum.
  10. Markets

    Commodities: The Gold, the Bad and the Ugly

    If you're an investor in almost any commodity, we're sorry. Of 28 commodities Investopedia tracked, only four had positive returns over the past twelve months, and mostly paltry returns at that.
RELATED FAQS
  1. What can cause an asset to trade above its market value?

    Learn some of the factors that can affect the price of an investment asset and the major reasons why an asset might trade ... Read Answer >>
  2. What is an efficient market and how does it affect individual investors?

    When people talk about market efficiency they are referring to the degree to which the aggregate decisions of all the market's ... Read Answer >>
  3. What is the relationship between implied volatility and the volatility skew?

    Learn what the relationship is between implied volatility and the volatility skew, and see how implied volatility impacts ... Read Answer >>
  4. What can cause an asset to trade below its market value?

    Understand how market price can differ from actual fair value, and the reasons that an investment asset might trade below ... Read Answer >>
  5. Which market indicators reflect volatility in the stock market?

    Learn the most commonly used technical indicators of stock market volatility that are watched by stock market traders and ... Read Answer >>
  6. What is the Volatility Ratio formula and how is it calculated?

    Understand what the volatility ratio indicator is, how it is calculated and the way this technical indicator is used by traders ... Read Answer >>
Hot Definitions
  1. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  2. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  3. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  4. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  5. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
  6. Weighted Average Life - WAL

    The average number of years for which each dollar of unpaid principal on a loan or mortgage remains outstanding. Once calculated, ...
Trading Center