All Pump, No Dump? The Impact Of Internet Deception On Stock Markets

Internet users are confronted with an increasing amount of deceptive contents. Thereby, especially pump and dump manipulations published via e-mail or within the web represent an important problem. Here, deceivers advertise stocks to profit from an increased price level. Within recent years, market surveillance authorities and software vendors have taken several countermeasures against such fraudulent stock recommendations. At the same time, deceivers have constantly updated their tactics when pursuing their campaigns. Thus, we investigate whether recent suspicious stock recommendations still have an impact on stock markets. We find that current pump and dump campaigns have a positive stock market impact and that they are followed by a decline in stock prices within the subsequent days. We enhance the previous understanding by examining whether spam campaign characteristics also influence the succeeding market reaction. In this context, positive sentiment expressed and the number of stock recommendations published have a positive impact. Consequently, market surveillance authorities and investors should be aware of the related risks and software vendors should consider campaign characteristics within their software to detect suspicious behavior.