Abstract
As the Internet has become more accessible, there has been a substantial increase in the amount of investment advice and information that can be accessed online. The Internet now plays an important role in keeping financial markets better informed by allowing private share investors better access to information about exchange traded securities anywhere in the world. The impact of ubiquitous access to online information is epitomized by the rapid growth in the number of online trading accounts (Tumarkin & Whitelaw, 2001). Recognized sources of Internet-based information include the Web sites of official securities exchanges, listed companies, and third-party operators providing access to a variety of investment information including real-time market data, research, and trading recommendations. However, in their search for legitimate information sources, many investors also seek out the investment rumors and tips that are frequently posted on Internet-based finance forums. Consequently, Internet finance forums have become popular virtual gathering places for individuals seeking information on stocks and stock market trading (Barnatt, 1998; Wysocki, 2000). Some participants in these forums form strong community bonds through the sharing of ideas and information across a diverse range of topics concerned with the trading of shares in publicly listed companies. These forums offer participants the experience of a community and provide objects in text that support the impression of an “imagined” community through commonality, connectedness, and deep play (Anderson, 1983; Pollner, 2002). These virtual communities have become important knowledge sharing environments with real and significant economic consequences (Armstrong & Hagel, 1996; Balasubramanian & Mahajan, 2001; Hagel & Armstrong, 1997; Kollock, 1999; Rothaermel & Sugiyama, 2001). Despite being a relatively new phenomenon, Internet discussion sites (IDS) play a significant role in the day-to-day dissemination of information about listed companies. The growth in online trading and the emergence of private day-traders have also contributed significantly to the general rapid increase in the popularity of Internet finance forums and message boards. Finance forums remain an important source of collective insights (stories, myths, behavior norms, etc.) on a broad range of topics relating to securities and securities trading. It can be argued that these forums empower private investors by supporting synchronous and asynchronous digital conversations on key securities related topics including trading strategies, tax implications, comparative assessments of stockbrokers and services, private research, and community-focused investor white papers. For many, these forums instill a strong sense of community and camaraderie both at the group and subgroup levels. From an international perspective, forums also allow individuals located in different parts of the world to exchange information about projects partnered by companies listed in other countries. However, not all forum participants have trading objectives that are collectively beneficial. The organization and structure of many financial forums enable some individuals to systematically cultivate and exploit the uncertainty or enthusiasm of others (Baker, 1999; Drake, Yuthas, & Dillard, 2000; Goldwasser, 1999). The manipulation can be intentional or unintentional and is usually motivated by a desire to effect an increase or decrease in the price of some security over a comparatively short period of time. Although there are a number of ways by which investors can be manipulated, the most common technique is known as “ramping.” Stock ramping usually involves an organized campaign aimed at increasing the price of a particular stock by the rapid dissemination of false or excessively optimistic information through a variety of media including finance forums and e-mail (Wysocki, 2000). The ramping of a stock can initially have a very seductive effect. Both the company and its investors can be lulled into a false sense of security by a rising stock price. However, this type of promotion inevitably leads to a lower price as the promoters offload their holdings to trusting newcomers who, in turn, force the price lower when earlier expectations are not met. Small, thinly traded companies are frequently targeted because it is easier to manipulate a stock when the company has a low capitalization and/or comparatively few shares on issue.