The impact of spam that touts stocks upon the trading activity of those stocks

[mandy]

We assess the impact of spam that touts stocks upon the trading activity of those stocks and sketch how profitable such spamming might be for spammers and how harmful it is to those who heed advice in stock-touting e-mails. We find convincing evidence that stock prices are being successfully manipulated through spam. 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. For a stock that is touted at some point during our sample period, the probability of it being the most actively traded stock in our sample jumps from 4% on a day when there is no touting activity to 70% on a day when there is touting activity. Returns in the days following touting are significantly negative.

The evidence accords with a hypothesis that spammers “buy low and spam high,” purchasing penny stocks with comparatively low liquidity, then touting them...

full article and link to research paper: http://papers.ssrn.com/sol3/papers.cfm?a..._id=920553

[mandy]

A related article - the SEC is finally taking action to curb the deluge of stock touting spam

The Securities and Exchange Commission suspended trading on Thursday in the stocks of 35 small companies linked to spam e-mail campaigns urging small investors to buy shares.

The SEC said it launched an enforcement effort to protect investors from potentially fraudulent spam e-mail promoting small company stocks with phrases like, ``Ready to Explode,'' ''Ride the Bull'' and ``Fast Money.''

``Today's action will disrupt the operations of these boiler rooms and make it harder for the spammers and promoters to dump their stock on an unsuspecting public,''...

full article: http://www.nytimes.com/reuters/business/....html?_r=1&oref=slogin

[regic]

the SEC is finally taking action to curb the deluge of stock touting spam

I hope it works.  I receive hundreds of spam emails every effin' day.

[FiberGuy]

[quote author=regic link=topic=6771.msg46279#msg46279 date=1173476940]

the SEC is finally taking action to curb the deluge of stock touting spam

I hope it works.  I receive hundreds of spam emails every effin' day.
[/quote]

Ditto, regic...

And to make matters worse, most of these stock-buying spams use image-embedded text, which seemingly slips through spam filters. 

[WebGraphicsSource]

I get all kinds of this "stock" spam

I have watched it a few times and wished I had bought it, and then sold it the next day