On the effects of stock spam e-mails

Over the past few years we have seen a rise in the number of unsolicited e-mails that recommend buying certain stocks. The senders of these mails claim to have private information indicating that strong increases in the prices of these stocks are imminent. We first describe the common characteristics of stocks being peddled by such e-mails. Next, we investigate the effects of stock spam e-mails on excess returns, turnover, and intra-day price range, and we find that spam e-mails have a significant impact on all of these variables. Unlike the information spread on discussion forums, the positive news contained in spam e-mails has no lasting positive effect on stock prices. We analyze whether spam effects depend on stock characteristics such as price level and average turnover, and we find that liquidity is a major factor in the success of spamming. Moreover, we show that repeated spamming on successive days sustains excess demand for target stocks, enlarging the time window for liquidation of the spammers' positions.