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.

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