Fake News and its Repercussions on the Stock Market

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Fake News and its Repercussions on the Stock Market
On April 24, 2013, a report from a Twitter handle of the Associated Press revealed an injury of Barrack Obama from an explosion at the White House. The news quickly spread to more than 4,000 retweets. Well, many believed the story to be the truth. However, there was no evidence to support the report, meaning the Barrack Obama was healthy and alive (Rapoza 1). Fake news is misinformation that spreads on social media and online channels with the intention to ensure market disruption using an aspect of "fear, uncertainty, and doubt (FUD)." Numerous businesses have experienced the impacts of fake news with some benefiting while others are making massive losses during the period of its spread (The Investor 1). One such sector that faces numerous challenges is the stock market. Bloggers deliver business information online and news sites with such article going viral with manipulation aspects regarding the market directions. As a result, marketers move asset prices through the written words as well as misleading headlines.
The April Tuesday event caused high volatility with most trades pointing the finger at the algorithms used to polish through the online activities with quick speeds when making a trade based on the misinformation. As a response to the incidence, the AP replied to the Twitter information with an immediate suspension of its account as well as informing the readers in other reports that such information regarding the White House explosion resulted due to hack (Rapoza 1). There was no harm and foul. The fake news or rumors with misinformation is the currently trending especially in the markets and social media. The AP press on its Twitter handle delivered information of an explosion in the White House on April 24, 2013, indicating that Barrack Obama had injuries. Immediately after the news went viral, a report by Financial Times on the same information on tweet stated that the information affected the stock market with S&P 500 realizing a decline of 0.9% which was responsible for clearing $ 130 billion stock values in the market within seconds (Rapoza 1). Consequently, the market recovered all the losses. However, the breakneck pace of competition in the stock market plunged resulting in investors remaining bankrupt. The fake news on explosion did not happen by chance, but it was a well-orchestrated move by the Wall Street firms using computers to transact numerous trades in seconds to make abnormal profits for each trade. Christopher Matthews notes the ideas according to Irene Aldrige who is the managing partner and the quantitative portfolio manager at the ABLE Alpha Trading. He mentions that traders at high-frequency levels compile all the sources of information such as Twitter, publications, SEC filings among others and then program computers to iron all the references. The computers identify critical words for negativity such as bankruptcy, merger or any other terms in business to signal new idea on the broad market. As the result of the activity, companies lose value while the money makers get good businesses such as the HFT firms (Christopher 1).
Borrowing from the Tuesday's incidence on White House, it seems many com...