Hi,
When I read the financial news, sometimes it says that a stock price moved because of blah blah blah. My question is, how do they know why the stocked moved, do they ask people why they bought or sold some stock? They could guess why, but do they really know?
Thanks
Steve
Ultimately it is based on a guess if there is no specific event. They might consult other people but they are guessing too.
I used to produce an internal customer satisfaction report. Most of the time monthly changes were not statistically different from month to month. However, management required commentary explaining why any absolute change had occurred. Based on feedback, I quickly learnt to attribute any positive movement to implementation of a pet initiative and any negative movement to external events. This point was originally to illustrate that journalists have column space to fill and an explanation makes the story more interesting and gives it pseudo authority but it struck me that it also explains many management reports.
I have met some of those who write the bla bla bla and let’s just say you are right. Something happens, they need a headline, and they quickly guess at it. ‘Taking profits’ is a favourite of mine. Two sides to every trade so, what were the other guys doing. Never believe the MSM know what they are dong. They usually don’t.
1 As far as I can tell, in many cases journalists have no idea why prices moved and make it up.
2 I address this little problem by usually not reading journalists commentary on market moves. If a stock that I'm interested in has moved by a significant amount, I firstly check if there was an RNS statement issued.
As im very new to this I would say sometimes it will be obvious why a price moved, a new product or great earnings report, but a lot of the time the markets are really only moving because of the big investment companies and if they like a stock or not so unless they have some insider knowledge its going to be pretty much a guess to make it look like they know what they are doing.
Ignore the noise.
