A recent study says that sending out stock-touting spam can be highly profitable. An analysis of more than 75,000 spam stock touts received by an e-mail account and a Usenet newsgroup between January 2004 and July 2005 showed that they were often followed by increases in trading volume, creating the liquidity necessary for the spammers to dump their shares. If a spammer bought a stock a day before heavy touting, then sold it the next morning, he or she took profits averaging 4.9 percent. Some spammers saw returns as high as 6 percent. One of the study’s authors, Jonathan Zittrain, professor of Internet governance at the University of Oxford and a visiting professor at Harvard Law School, says one countermeasure could be for brokerage houses to impose waiting periods between trades on first-time penny-stock investors, as is done with some options trading.
Subscribe to Continue Reading