Every day I get dozens of these "XYZ is going through the roof buy now!" stock tout spams hyping pinksheet penny stocks.

I was thinking it might be fun to set up a play money portfolio with the stocks mentioned in every spam to see just how much money one could lose. Then I thought, surely somebody on the internets has done that already.

So I looked around and found something even better.

Read more after the jump...

Some researchers at Harvard and Purdue with too much time on their hands (or a grant?) did a massive study of more touts that a normal person could ever track.

Their conclusion? There's money to be made buying and selling stocks touted in spams - if you're the spammer:

Based on a large sample of touted stocks listed on the Pink Sheets quotation system, we find that stocks experience a significantly positive return on days when they are heavily touted via spam, and on the day preceding such touting.

Volume of trading also responds positively and significantly to heavy touting. Indeed, on a day when no tout has been detected in our database, the likelihood of a touted stock being the most actively traded stock that day is only 6%. On the other hand, on days when there is touting activity, the probability of a touted stock being the single most actively traded stock is 81%.

Returns in the days following touting are significantly negative. The evidence accords with a hypothesis that spammers buy low and spam high, purchasing penny stocks with comparatively low liquidity, then touting them - perhaps immediately after an independently occurring upward tick in price, or after having caused the uptick themselves by engaging in preparatory purchasing - in order to increase or maintain trading activity and price enough to unload their positions at a profit. Selling by the spammer then results in negative returns following touting.

Investors who respond to touting are losing, on average, 5.25% in the two day period following touting. For the quintile of stocks in our sample that are touted most heavily, this 2-day loss approaches 8%. These estimates are conservative, as they do not account for transaction costs.

So there you go. There's apparently a whole industry set up around stock tout spamming. Which is more evidence that the reason there is so much spam is because it works.