The Anatomy of Pump n' Dump Stock Spamming

giorgiofr writes "Laura Frieder and Jonathan Zittrain have analyzed pump n' dump spam activity in their paper 'Spam Works: Evidence from Stock Touts and Corresponding Market Activity'. Unbelievably, it appears that spammers are able to achieve a 5% gain on pumped stock before dumping it, along with a dramatic increase in transaction volume of the stock. From the synopsis: ' We suggest that the effectiveness of spammed stock touting calls into question prevailing models of securities regulation that rely principally on the proper labeling of information and disclosure of conflicts of interest to protect consumers, and we propose several regulatory and industry interventions. Based on a large sample of touted stocks listed on the Pink Sheets quotation system, we find that stocks experience a significantly positive return on days prior to heavy touting via spam. Volume of trading responds positively and significantly to heavy touting.'"

Comments

Re:People who buy stocks based on spam

[GigsVT]

it'll go the way of nigerian spams.

You mean more common than ever?

Re:Why there is spam, how to get rid of spam

[Lord Ender]

Much like cigarette tax money goes to health education, wouldn't it be great if lottery profits were required to go to statistics and finance education?

That said, all the people I know who p[l]ay the lottery claim to do it because the realization of the possibility of great wealth is entertaining enough that it is worth the expense, even if they never win.