Are Individual Investors Influenced by the Optimism and Credibility of Stock Spam Recommendations?

This study examines attention‐driven investment decisions using a sample of firms essentially unknown to investors prior to becoming the target of a stock spam campaign. We show that the market reaction to spam varies predictably with the content of the spam message. Spam date returns and volume are...

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Bibliographic Details
Published inJournal of business finance & accounting Vol. 40; no. 9-10; pp. 1155 - 1183
Main Authors Nelson, Karen K., Price, Richard A., Rountree, Brian R.
Format Journal Article
LanguageEnglish
Published Oxford Blackwell Publishing Ltd 01.11.2013
Subjects
Credibility
Decision making
Disclaimers
Economic information
Exchange
Investment decision
Investment returns
investor attention
Investors
press releases
Securities markets
Spamming
stock spam
Stocks
Studies
target prices
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Summary:This study examines attention‐driven investment decisions using a sample of firms essentially unknown to investors prior to becoming the target of a stock spam campaign. We show that the market reaction to spam varies predictably with the content of the spam message. Spam date returns and volume are significantly higher for stocks targeted by spam emails containing optimistic target price projections bundled with ostensibly credible information quoted from a previously issued company press release. There is also some evidence that disclaimers in spam messages reduce, but do not eliminate, the market response. Attention effects also contribute to spammers’ selection of stocks to target and to spam‐related enforcement actions by the Securities and Exchange Commission.
Bibliography:ark:/67375/WNG-88PXX6R6-4
ArticleID:JBFA12053
istex:B26D1FCA08E4D239000D7E9F5D1ED0BFDF4627BD
The authors are respectively from Rice University, Utah State University, and Rice University. The authors thank an anonymous referee, Peter Pope (Editor), Cathy Cole, Steve Crawford, Patty Dechow, Gustavo Grullon, Per Olsson, K. Ramesh, Greg Sommers, James Weston, workshop participants at Brigham Young University, Ohio State University, Rice University, Texas Tech University, University of California at Berkeley, University of Texas at San Antonio, Utah State University, the 2008 American Accounting Association Financial Accounting and Reporting Section Midyear Meeting, and the 2008 Lone Star Accounting Research Conference. We also appreciate the research assistance of Sol Jin, Tammy Knots, Ritesh Kumar, Ben Perry, Dan Smith, Luke Stadel and Han Stice. Richard Jones and Leonard Richardson generously provided some of the data for this study. (Paper received October, 2012; revised version accepted October, 2013).
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ISSN:0306-686X
1468-5957
DOI:10.1111/jbfa.12053