By Adinah Brown
Long gone are the days in which we waited for the evening news to be aired on TV or for the morning newspaper to be thrown across our lawns to get the latest financial news. Today’s rapid digital era makes getting the news a 24/7 event. Social media has become the go-to place for many to get the latest news and news outlets are increasingly relying on their digital channels for distribution.
This surge in the use of the internet for financial news consumption, has developed on the back of constant connectivity and the urge to create the latest viral piece. A combination which has turned the web into the perfect arena for fake financial news. While some news pieces are so far-fetched that are easily spotted as fake, others seem so real that they quickly spread through social media, affecting the prices of various financial assets.
In recent years, investment firms have established the habit of scouring through social media networks to analyze posts from news outlets and industry leaders with the purpose of gauging market sentiment. While these firms use systems to try and differentiate reliable news from unreliable ones, the systems aren’t perfect and sometimes fall victim to fake news.
In April of 2013, the official Twitter handle of the reputable news outlet, Associated Press, got hacked, and a report of two explosions taking place at the White House and then President Barack Obama getting hurt, was twitted. Although the then White House Press Secretary and the AP were quick to discredit the news and issue statements, the market impact was already done and traders around the world were trading on the Tweet. The Dow Jones dropped over 140 points, quickly recovering with triple-digit gains. According to Reuters, the temporary loss may have totaled $136.5 billion in the S&P 500 alone.
When the media is constantly looking to bring the next big story, journalists are often quick to report news based on their own biases and agenda, and when seeing the public’s reaction in the form of retweets and shares, the media incites crowds to take even further action, just to drive clicks.
Free Reports:
Adding fake news to times of hypersensitivity towards terrorism threats for example, makes people believe the media without so much as fact checking, making logical choices or waiting for the dust to settle. This is particularly an issue for fundamental traders, who use the news as fact checking mechanisms. A fundamental trader may hear a financial news story and believe it. If enough traders take the same action, prices are driven in a certain direction, and by the time the dust settles, people have already lost significant dollars.
As common channels of financial news delivery, search engine giant Google and social media leader Facebook, have started to build their very own fake news detectors. However, until these B.S detectors become sufficiently sophisticated, traders should do their due diligence by fact checking news pieces and resisting the urge to react.
About the Author:
Adinah Brown is a professional writer who has worked in a wide range of industry settings, including corporate industry, government and non-government organizations. Within many of these positions, Adinah has provided skilled marketing and advertising services and is currently the Content Manager at Leverate.