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

Journal of Business Finance & Accounting, Forthcoming

49 Pages Posted: 1 Apr 2009 Last revised: 28 Aug 2013

See all articles by Karen K. Nelson

Karen K. Nelson

Texas Christian University - Department of Accounting

Richard A. Price

University of Oklahoma

Brian Rountree

Rice University - Jesse H. Jones Graduate School of Business

Date Written: July 31, 2013

Abstract

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.

Keywords: investor attention, stock spam, target prices, press releases

JEL Classification: G11, G12, G14, M41

Suggested Citation

Nelson, Karen K. and Price, Richard A. and Rountree, Brian Robert, Are Individual Investors Influenced by the Optimism and Credibility of Stock Spam Recommendations (July 31, 2013). Journal of Business Finance & Accounting, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1371265 or http://dx.doi.org/10.2139/ssrn.1371265

Karen K. Nelson

Texas Christian University - Department of Accounting ( email )

M.J. Neeley School of Business
TCU Box 298530
Fort Worth, TX 76129
United States
817-257-7567 (Phone)

Richard A. Price (Contact Author)

University of Oklahoma ( email )

307 W Brooks
Norman, OK 73019
United States
405-325-5759 (Phone)

Brian Robert Rountree

Rice University - Jesse H. Jones Graduate School of Business ( email )

6100 South Main Street
P.O. Box 1892
Houston, TX 77005-1892
United States

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