What is ‘pump and dump’ in Finance?

  • This refers to a form of financial manipulation where investors in a stock, or any other financial security, try to temporarily increase its price in order to sell their holdings at a favourable price.
  • Stock manipulators usually bring about a sharp spike in the price of the targeted stock by spreading exaggerated news that is favourable to the stock.
  • It is usually targeted at small and mid-cap stocks which have low liquidity, and so can be influenced more easily by manipulators.
  • Even large-cap stocks, however, can be manipulated temporarily by bigger investors wanting to make a quick buck. Pump and dump schemes have been outlawed in markets across the world.


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