Financial News and Market Panics in the Age of Highfrequency Sentiment Trading Algorithms

Jan  Kleinnijenhuis; Friederike Schultz; Dirk Oegema; Wouter van Atteveldt

doi:10.1177/1464884912468375

Financial News and Market Panics in the Age of Highfrequency Sentiment Trading Algorithms

Jan Kleinnijenhuis, Friederike Schultz, Dirk Oegema, Wouter van Atteveldt

Vrije Universiteit Amsterdam

Research output: Contribution to journal › Journal article › Research › peer-review

Abstract

Whether financial news may contribute to market panics is not an innocent question. A positive answer is easily used as a legitimation to limit the freedom of financial journalists. Long-term effects of news are moreover inconsistent with the Efficient Market Hypothesis (EMH), which maintains that new information gives immediately rise to a new equilibrium. The EMH is under discussion, however, as a result of the transformation of financial markets and of financial journalism due to new economic thoughts, new communication theories, high-frequency trading and high-frequency sentiment analysis. As a case study of a market panic we show the impact of US news, UK news and Dutch news on three Dutch banks during the financial crisis of 2007–9. To avoid market panics, financial journalists may strive for greater transparency, not only on asset prices and corporate philosophies, but also on network dependencies in the worldwide financial markets.

Original language	English
Journal	Journalism
Volume	14
Issue number	2
Pages (from-to)	271-291
ISSN	1464-8849
DOIs	https://doi.org/10.1177/1464884912468375
Publication status	Published - 2013

Access to Document

10.1177/1464884912468375

Handle.net

Persistent link

Cite this

@article{162de4704ea244c68726ff1525b765da,

title = "Financial News and Market Panics in the Age of Highfrequency Sentiment Trading Algorithms",

abstract = "Whether financial news may contribute to market panics is not an innocent question. A positive answer is easily used as a legitimation to limit the freedom of financial journalists. Long-term effects of news are moreover inconsistent with the Efficient Market Hypothesis (EMH), which maintains that new information gives immediately rise to a new equilibrium. The EMH is under discussion, however, as a result of the transformation of financial markets and of financial journalism due to new economic thoughts, new communication theories, high-frequency trading and high-frequency sentiment analysis. As a case study of a market panic we show the impact of US news, UK news and Dutch news on three Dutch banks during the financial crisis of 2007–9. To avoid market panics, financial journalists may strive for greater transparency, not only on asset prices and corporate philosophies, but also on network dependencies in the worldwide financial markets. ",

keywords = "Behavioral finance, Communication theories, Content analysis, Efficient market hypothesis, Financial journalism, Financial markets, News effects",

author = "Jan Kleinnijenhuis and Friederike Schultz and Dirk Oegema and Atteveldt, {Wouter van}",

year = "2013",

doi = "10.1177/1464884912468375",

language = "English",

volume = "14",

pages = "271--291 ",

journal = "Journalism",

issn = "1464-8849",

publisher = "SAGE Publications",

number = "2",

}

TY - JOUR

T1 - Financial News and Market Panics in the Age of Highfrequency Sentiment Trading Algorithms

AU - Kleinnijenhuis, Jan

AU - Schultz, Friederike

AU - Oegema, Dirk

AU - Atteveldt, Wouter van

PY - 2013

Y1 - 2013

N2 - Whether financial news may contribute to market panics is not an innocent question. A positive answer is easily used as a legitimation to limit the freedom of financial journalists. Long-term effects of news are moreover inconsistent with the Efficient Market Hypothesis (EMH), which maintains that new information gives immediately rise to a new equilibrium. The EMH is under discussion, however, as a result of the transformation of financial markets and of financial journalism due to new economic thoughts, new communication theories, high-frequency trading and high-frequency sentiment analysis. As a case study of a market panic we show the impact of US news, UK news and Dutch news on three Dutch banks during the financial crisis of 2007–9. To avoid market panics, financial journalists may strive for greater transparency, not only on asset prices and corporate philosophies, but also on network dependencies in the worldwide financial markets.

AB - Whether financial news may contribute to market panics is not an innocent question. A positive answer is easily used as a legitimation to limit the freedom of financial journalists. Long-term effects of news are moreover inconsistent with the Efficient Market Hypothesis (EMH), which maintains that new information gives immediately rise to a new equilibrium. The EMH is under discussion, however, as a result of the transformation of financial markets and of financial journalism due to new economic thoughts, new communication theories, high-frequency trading and high-frequency sentiment analysis. As a case study of a market panic we show the impact of US news, UK news and Dutch news on three Dutch banks during the financial crisis of 2007–9. To avoid market panics, financial journalists may strive for greater transparency, not only on asset prices and corporate philosophies, but also on network dependencies in the worldwide financial markets.

KW - Behavioral finance

KW - Communication theories

KW - Content analysis

KW - Efficient market hypothesis

KW - Financial journalism

KW - Financial markets

KW - News effects

U2 - 10.1177/1464884912468375

DO - 10.1177/1464884912468375

M3 - Journal article

SN - 1464-8849

VL - 14

SP - 271

EP - 291

JO - Journalism

JF - Journalism

IS - 2

ER -