hot stock tips

[9/25/06] The title of a paper by Laura Frieder and Jonathan Zittrain gets right to the point: “Spam Works: Evidence from Stock Touts and Corresponding Market Activity.”

Incredibly, while Internet users will readily delete emails touting Free Medz and good deals on V-i-a-g/ra, investors have plenty of time to read the email touts, find the ticker symbol, and buy the touted stock.

The authors reviewed a sample of Pink Sheet stocks touted in more than 75,000 emails. After all that number crunching, they concluded that the stocks went up on heavy volume the day they were touted. Stocks also showed unusual strength the day before the spamming as the spammers were no doubt buying into the names they were about to blast around the Internet. In the days following the big spam day, the stocks went down as the spammers continued selling and volume from new buyers dried up.

[9/21/06] According to a recent study of more than 1.8 million investment spam messages by Laura Frieder of Purdue University and Jonathon Zittrain of the University of Oxford, the purpose of investing spam is to provide enough liquidity for those touting the stock to sell their shares at a profit. For the hypesters, average returns from the day before the spam was sent to the day of heaviest touting was as much as 6%. What if you were one of the ones who received the spam and decided to "take a flyer" when you got the email? Your average loss would be as much as 8%.

[4/19/06] Have you ever wondered if you're missing out on a great investment opportunity by NOT investing in the "hot" stock tips you receive in your e-mailbox?

Joshua Cyr decided to find out. On May 5, 2005, he decided to track what would happen if he purchased 1000 shares of every stock for which he received a hot stock tip via spam.

Naturally, he didn't actually waste money on this experiment. Instead, he just pretended to buy the stocks and kept track of their value on a website he created (so he never actually bought the stocks). He simply tracked what would have happened if he had actually purchased these stocks based on the stock tips.

Joshua expected that he'd get temporary, short-term windfalls on all these stocks and then see big losses. What he found instead surprised him. Almost ALL of the stocks went up a few cents at most, and then dropped dramatically the next day. So, no short term windfalls.

Joshua tracks the stocks real time at his site, so you can see how he's doing at any moment.