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August 28, 2006

Do Pump and Dump Scams Work?

posted by MR WAVETHEORY at 8/28/2006 07:28:00 PM
Do you get emails from spammers who promise to make you a fortune on the next hot drilling stock? Well, I think that was a rhetorical question. Because we probably all do. Now, a study shows that the reason spammers keep spamming is because it works.

Pump and Dump Scams Work
Eric Savitz at Barron's reports that "a study that found people who respond to e-mailed “pump and dump” scams can lose 8% of their investment in two days, but that “spammers who buy low-priced stock before sending the e-mails, typically see a return of between 4.9% and 6% when they sell." It proves the law of conservation: 8% loss for buyers, 6% gain for scammers - what about the other 2%? It probably goes to the stock brokers - commission!

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