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Can the stock market be manipulated by large corporations and wealthy investors?

Alwilda Usmar

Well, as an avid user of social media, I can say that the stock market is definitely a topic that's been buzzing around lately. And the question is a valid one - do large corporations and wealthy investors have the ability to manipulate the stock market?

First, let's talk about the term "manipulate." As defined by Investopedia, market manipulation is "a type of market abuse where there is a deliberate attempt to interfere with the free and fair operation of the market and create artificial, false or misleading appearances with respect to the price of, or market for, a security, commodity or currency." Essentially, manipulation is any action taken that distorts the true market value of a security.

Now, it's important to note that market manipulation is illegal. The U.S. Securities and Exchange Commission (SEC) has strict rules in place to prevent such actions, and anyone caught participating in market manipulation can face hefty fines and even criminal charges.

With that being said, there have been instances where large corporations and wealthy investors have been accused of manipulating the stock market. For example, some have pointed to the "Flash Crash" of 2010, where the Dow Jones Industrial Average plummeted almost 1,000 points before quickly recovering. While the exact cause of the crash is still debated, some believe that high-frequency traders and large institutional investors played a role in the sudden drop.

Another example is the GameStop saga that unfolded earlier this year. At its core, the GameStop situation was a tussle between hedge funds and a group of retail investors, led by the subreddit WallStreetBets. Some argue that the hedge funds were engaging in market manipulation by shorting more shares of GameStop than actually existed, driving down the price and then buying back the shares at a lower price to make a profit. Meanwhile, the WallStreetBets group was accused of "pumping and dumping" the stock - artificially inflating the price and then selling off their shares at a profit before the price plummeted.

However, it's worth noting that these instances are the exception, not the rule. The vast majority of market participants are acting in good faith and following the rules set forth by the SEC. Plus, there are several safeguards in place to prevent manipulation, such as restrictions on insider trading and requirements for transparency in trading activity.

All in all, while there may be some instances of market manipulation by large corporations and wealthy investors, they are the exception rather than the rule. The vast majority of market participants are acting within the law and working to ensure a fair and transparent market for all.