Financial news and market panics in the age of high frequency trading algorithms

J. Kleinnijenhuis, F. Schultz, D. Oegema, W.H. van Atteveldt

Research output: Contribution to JournalArticleAcademicpeer-review


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. © The Author(s) 2013.
Original languageEnglish
Pages (from-to)271-291
Number of pages21
Issue number2
Publication statusPublished - 2013


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