Spam Works

New York Times features Prof. Jonathan Zittrain and Prof. Laura Frieder's recent paper, "Spam Works," in "Stock Tips From Spam Aren’t Just Silly. They’re Costly":

In almost all cases, the professors found, the stocks promoted in these messages do not trade on major exchanges. Instead, they tend to be illiquid and are found in the off-market, over-the-counter trading arena known as the Pink Sheets. Typically, such stocks are not followed regularly by an investment adviser or Wall Street research department. Their illiquidity, and the absence of regular scrutiny, make the stocks relatively easy to manipulate, the professors said.

To compile a database of stock-touting spam, the researchers combed through the 26,000 junk messages that Professor Zittrain received in his own e-mail box from January 2004 to July 2005. They also surveyed 1.8 million specimens of spam received during that time by the Internet newsgroup called Nanas (for net.admin.network.abuse.sightings), which alerts administrators of e-mail networks to spam outbreaks. While Nanas has many contributors around the world, the professors concede that there “is no way to assure that Nanas’s archive is a representative cross-section” of all spam.

All told, some 300 stocks were recommended in the studied messages, each of which contained a time-stamp indicating when it was sent. Because not all of the messages hyping a particular stock were delivered at precisely the same time, or even on the same day, the professors focused on the day when the greatest number of messages touting a certain stock were received. On that day, they found, the stock was 13 times more likely to be the most actively traded Pink Sheet issue than it was on days when they had no evidence that junk e-mail was sent urging its purchase.

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