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Was recently at a meeting with a service provider, the excellent Comendo of Denmark, that provides internet and email security to many large multinationals throughout Europe, and they asked me: but come on, do stock pump-and-dump scams really work? Who in this day and age would fall for such a scam? (Please note: I am paraphrasing here.)

While I've blogged about it numerous times before, I found the following succinct summation on the effectiveness of spam scams at Slashdot.org. It follows:

"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.'"

Posted by pschooff in Spam |Digg This|Add to del.icio.us

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