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markets, even breaking relevant laws. The above
illegal behaviors are referred to as market abuse,
anomalies or exceptions in stock markets.
Stock market surveillance is responsible
for the detection of illegal behaviors in stock
markets. The technologies play important roles
in effective market surveillance. With the de-
velopment of stock market, the technologies of
market surveillance have evolved from simple
rule based approaches to advanced approaches
based on artificial intelligence and data mining.
In particular, the researches on how to effectively
utilize the advanced technologies for the task of
surveillance have been developed in most stock
exchanges. These researches can be summarized
as exception mining in stock markets.
In this chapter, we will present a comprehen-
sive literature review on the recent advances of
exception mining in stock markets. Various ap-
proaches are currently being used for the detection
of exceptions by researchers all over the world. For
example, outlier mining technologies have been
researched and utilized in some exchanges. Most
of the publications in this area focus on the specific
technologies. So it is necessary to summarize the
current advances of exceptions mining in stock
markets. By doing so, we expect to provide a clear
picture of the technologies utilized in this area.
We hope it can provide guidance to professionals
and researchers in this area to find the appropriate
solutions for their own purposes.
The rest of this chapter is organized as follows.
Section 2 will introduce the related background of
stock market and stock surveillance. Some impor-
tant concepts and issues, such as the concept of
insider trading and market manipulation, will be
described and illustrated with real-life examples.
Section 3 will discuss recent technologies for
stock market surveillance, such as rule-based ap-
proaches, statistic methods, outlier detection tech-
nologies, etc. The technologies will be analyzed
and compared, and their strength and weakness
will be pointed out. A detailed introduction of
our current research, outlier mining on multiple
time series, will be given in Section 4. Section 5
will discuss some future research directions in
exception mining in stock market. The chapter
will be concluded in the last section.
BAckground of Stock MArket
And Stock SurveIllAnce
Stock Market
Stock market is the platform where the buyer and
seller trade for stock and its derivatives (Cheng
2006,Allen 1992, Lucas 1993). It is one of the most
important sources for companies to raise money
(Jain 2005). The business is able to be traded
publicly in the form of stock. The accumulation
of additional capital makes companies expansion
by selling shares of ownership of the company in
a public market. In addition, exchanges provide
the liquidity which affords investors the ability to
quickly and easily sell securities (Charest 1978).
Stock market has become an important part of the
dynamics of economic activity. Nowadays it has
become an indicator of economy and can influence
the social mood. For example, when the stock
market is on the rise, the economy is considered to
be positive; otherwise, the economy is regarded as
upsetting. Therefore, the stock market is regarded
as the primary indicator of a country's economic
strength and development (Jain 2005).
The stocks are listed and traded on stock
exchanges. Exchanges act as the clearinghouse
for each transaction in stock markets (John &
Narayanan 1997). They guarantee payment to
the seller of a security by collecting and deliver-
ing the shares. The risks for buyers or sellers are
expected to be eliminated or controlled to some
extent. Exchanges also take the responsibilities of
regulations of stock markets (Bettis et al. 1998).
They have the duty to provide fair and transparent
platform for all participants.
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