http://www.nytimes.com/2006/09/10/business/yourmoney/10stra.htmlStock Tips From Spam Aren’t Just Silly. They’re Costly. (Hulbert)
. . .
The professors concluded that unscrupulous traders were able to turn a tidy profit by buying shares before sending their spam and then selling as investors started acting on the spam’s advice. In contrast, investors who bought shares realized a sizable loss.
In an interview, Professor Frieder said she was initially skeptical that investors were actually following the advice in stock-touting junk e-mail. After all, few people ever say they welcome spam; most seem eager to zap it from their computers. But her skepticism faded after analyzing the data. “I am aware of no other plausible explanation for the patterns we found,” she said.
She said that the authors based their conclusions entirely on an analysis of aggregate data, not on a study of particular cases, so they had no proof that any individuals in particular were directing such schemes.
IN any event, Professor Zittrain said in an interview, the Securities and Exchange Commission has rarely tried to prevent stock-touting spam messages, many of which contain fine print disclosing that the spammer will be selling the very stock being recommended for purchase.
Of course, the most immediate lesson for investors is this: ignore unsolicited e-mail messages. But there is also a broader lesson, relevant even for those who ignore spam. It has do with the desire, even eagerness, to believe that there is a stock out there that could make a lot of money, and with how that desire affects people’s judgment. As Professor Zittrain put it, “greed all too easily colors our objectivity,” and it’s true for all types of investors.
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