[funsec] Pump & Dump spamming works

Sean Donelan sean at donelan.com
Thu Mar 8 21:50:51 CST 2007


On Fri, 9 Mar 2007, Nick FitzGerald wrote:
>> Wow, almost a 150 fold increase in share volume after spam barrage.  It also
>> looks like someone can make money on P&D stocks, if they get in early and
>> then get out quickly.  ...
>
> This is not news -- at least two fairly widely reported academic
> studies published last year put some numbers on what anyone with a
> brain and who looks at their spam already knew...


   "You can't cheat an honest man."

Even calling it Pump&Dump is a bit misleading.  Other people might think
they can also "ride the spam wave" if they have the right market timing,
sometimes called the bigger fool theory.

Like scientists being fooled by psychics, the research assumed the 
marketplace quotation data accurately predicts what the trades "would have 
been."  But they didn't actually make those trades.

In some cases, the game is rigged even worse than the published studies 
found.  In very illiquid markets, sometimes almost everyone except the 
mark(s) are accomplices.  With accomplices on both sides of the 
trades, quotes and volume don't mean much until the mark loses his
money.  Then whose order actually gets filled?


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