The Definition of Rumortrage
Rumortrage can be defined as a type of trading where individuals or groups use rumors and other misinformation to make large profits in the stock market. These traders take advantage of the market’s reaction to rumors and use it to their advantage by either buying or selling shares, depending on the rumor’s content.
While rumortrage can be lucrative, it is also highly controversial and often illegal. The Securities and Exchange Commission (SEC) has strict rules against insider trading and market manipulation, both of which can be associated with rumortrage.
A Brief History of Rumortrage
While the term rumortrage may be relatively new, the practice has been around for centuries. In the past, traders used to spread rumors through word of mouth, newspapers, and other traditional media channels. However, with the rise of the internet and social media, the process has become more sophisticated, and rumors can now spread faster and farther than ever before.
One of the most famous examples of rumortrage occurred in the early 20th century, when financier J.P. Morgan allegedly spread rumors about the financial health of the United Copper Company. Morgan and his associates then shorted the stock, making millions when the company eventually went bankrupt.
Today, rumortrage remains a controversial and often illegal practice. The SEC and other regulatory bodies continue to monitor the market for signs of insider trading and other forms of market manipulation, in an effort to maintain a level playing field for all investors.