How much money would it take to artificially inflate/depress a stock?

Question

Please include links or at least keywords to research papers if possible.

This is basically an investigation into max pain / stock pinning and what it would take for a hedge fund to cause it.

Some inputs

• market capitalization
• Institutional versus retail ownership
• Transparency of business model
• Implied volatility, Strike, time to expiry
• availability of shares to short

The reason I ask is the behavior of HTZ this week seemed peculiar and the PUT options were priced very high.

I do understand that this is a boogey man with options and I'm not looking for answers to pinning/max pain manipulation, but rather just the simple question of what is required to influence a stock price and if there has been any studies done on this.

Answer 1

Actually the recent work by Koijen and Gabaix tries to tackle precisely a similar question.

They do not have a paper yet. Here's the link: https://www.youtube.com/watch?v=apCxV8zxoOc

They find that buying 1% of the market increases prices by 5-12%. I.e. markets are inelastic. So if this is true for the market, I am assuming for individual stocks would be even worse.

Answer 2

I tried to answer a similar question recently here: How can we estimate new stock price after a large purchase?

Whilst it might not be exactly what you might be looking for, it might help you understand the problem in a practical context.

Answer 3

It appears that regular pension fund contributions inflate the average stock prices with the inelastic price multiplier of order 5. Further developments of this concept have been discussed by Bouchaud and myself. There is a lot of literature on single-stock price impact in ArXive and SSRN, too.