DEFINITION of 'Rumortrage'

A term often used by traders to refer to increased trading caused by a takeover rumor. Rumortrage is a slang term used by many on the Street to refer to a situation where a public rumor of a potential merger or acquisition leads to increased trading by retail investors in the hope that the rumor will lead to a jump in stock prices.

BREAKING DOWN 'Rumortrage'

While rumortrage is not an uncommon practice, it often leads to uninformed retail investors becoming M&A speculators, taking undue risks in the wake of nothing more than a rumor or hearsay.

For example, if firms A and C are both in the auto industry and rumors say that firm A will take over firm C, an increase in trading in firms A and C's stock illustrates rumortrage.

  1. Market

    A medium allowing buyers and sellers of a specific good or service ...
  2. Takeover

    A corporate action where an acquiring company makes a bid for ...
  3. Speculator

    A person who trades derivatives, commodities, bonds, equities ...
  4. Mergers And Acquisitions - M&A

    A general term used to refer to the consolidation of companies. ...
  5. Sector

    1. An area of the economy in which businesses share the same ...
  6. Garbatrage

    An increase in price and trading volume in a particular sector ...
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