I was led to this amazing story by a report on NPR today (Penny-Stock Spam Yields Profits — for Some) and then a BBC article (Spammers manipulate stock markets). Researchers Laura Frieder and Jonathan Zittrain have analyzed the effectiveness of email spam touting penny stocks. You know the type:

From: Stock Gurus AA < guadalupe-CurtisP@fleetlease.com>
Subject: Sleeper Stock Alert (GFPE)

*** EARLY BIRD INVESTOR ***

GFPE Huge Advertising Campaign That will run all
week.. watch this stock move move move.. get in while you
can at a price that is affordable and double mabye even
triple your investment in a matter of 24/72 hrs. this is a
once and a lifetime oppertunity.  this stock has some awsome
news being released later tonight and is definatly not to be
missed!!
…

The authors estimate that about 15% of current email spam messages are stock touts.

Their recent article

Frieder, Laura and Zittrain, Jonathan, “Spam Works: Evidence from Stock Touts and Corresponding Market Activity” (July 25, 2006).

describes their analysis of more than 75,00 messages sent between January 2004 and July 2005. The results show that such spam can effect markets. Spammers who buy low-priced stock, flood the internet with spam touting it, and then immediately sell typically achieve a return of between 4.9% and 6%. The suckers who buy the stock, driving up the price, only to see it drop by up 8% as the spammers cash in.

Their raw data and interactive charts showing price and volume changes for individual touted and control stocks is available online