alexandra_thorn (![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png)
alexandra_thorn) wrote2012-08-17 10:10 am
alexandra_thorn) wrote2012-08-17 10:10 am
low-information headlines
Recently I started to actively think about investments. I use Scottrade for stock market transactions because of their low transaction fees and otherwise not trying to sell me products I don't need.
Some of their research functions are useful too, though I'm starting to learn that Yahoo finances is more informative for a lot of purposes. In any case, one amusing situation that I find myself in is I'll notice that a stock price has just gone up (or down) dramatically, and I'll wonder what's driving the change. Short term changes in stock prices might not be predictable or say anything about performance, but the big ones generally reflect some sort of change in public perception of the company.
So, what do I do? Since there's a link right there on Scottrade or Yahoo Finances, the first thing I do is check the news headlines. More than half the time, the top headline is something like this:
This information is virtually useless to me. I already know that MasTec's share price is going up rapidly. I can see that by looking at the graph. If I saw a headline like this, I might be interested to see what the graph looked like, but probably not the other way around. Now, this type of headline does serve a purpose. E.g., if you own MasTec but don't follow its prices, a headline like this might be a useful cue that it's a good time to sell.
But when it comes to financial news, the behavior of the market often seems to get more attention than the processes that should theoretically be driving these changes. And I can't help wondering what the consequences of this type of reporting are. What happens when the behavior of the market becomes the major driver for market transactions?
The fascination with the market reminds me a different but related phenomenon when it comes to reporting on electoral politics. There's a big emphasis on polling numbers. It's not clear how this type of information is supposed to affect Joanne Citizen. Is this supposed to change how we vote? How does it change our perceptions of partisanship?
Some of their research functions are useful too, though I'm starting to learn that Yahoo finances is more informative for a lot of purposes. In any case, one amusing situation that I find myself in is I'll notice that a stock price has just gone up (or down) dramatically, and I'll wonder what's driving the change. Short term changes in stock prices might not be predictable or say anything about performance, but the big ones generally reflect some sort of change in public perception of the company.
So, what do I do? Since there's a link right there on Scottrade or Yahoo Finances, the first thing I do is check the news headlines. More than half the time, the top headline is something like this:
"MasTec is Among the Companies in the Construction & Engineering Industry with the Best Relative Performance (MTZ, URS, JEC, FLR, KBR)
2 hours 21 minutes ago - Financial News Network Online - News Corner via Comtex
Below are the top five companies in the Construction & Engineering industry as measured by relative performance. This analysis was compiled based on yesterday's trading activity as we search for stocks that have the potential to outperform. ..."
This information is virtually useless to me. I already know that MasTec's share price is going up rapidly. I can see that by looking at the graph. If I saw a headline like this, I might be interested to see what the graph looked like, but probably not the other way around. Now, this type of headline does serve a purpose. E.g., if you own MasTec but don't follow its prices, a headline like this might be a useful cue that it's a good time to sell.
But when it comes to financial news, the behavior of the market often seems to get more attention than the processes that should theoretically be driving these changes. And I can't help wondering what the consequences of this type of reporting are. What happens when the behavior of the market becomes the major driver for market transactions?
The fascination with the market reminds me a different but related phenomenon when it comes to reporting on electoral politics. There's a big emphasis on polling numbers. It's not clear how this type of information is supposed to affect Joanne Citizen. Is this supposed to change how we vote? How does it change our perceptions of partisanship?