False market: 50 shades of grey

WHAT constitutes a false market for stocks? It's a seemingly straightforward question but, as with many areas relating to daily trading, numerous grey areas abound. Would month-ending or year-ending "window-dressing'' of stocks qualify? What about last-minute buying or selling of particular counters as part of "portfolio rebalancing'' because of changes to benchmark indices?

In both cases, compelling arguments can be made for the existence of a false market. For example, if the Straits Times Index suddenly shoots up or plunges because of "portfolio rebalancing'' and this induces a naive retail investor to subsequently suffer a loss because he or she hastily bought or s…