Want to know if the live or current stock market report in the news or the papers will affect the stock market performance? Read my article to find out the answer. You would realize that a free stock market report that you can find in the papers or news can actually be valuable information for the smart investor and I am passing that information to you! This hub will tell you how a stock market report today can influence the stock market prices of tomorrow! Oh and if you are a beginner and interested in Beginner Stock Market Investing then please visit that hub first before you read this one! Of course if you prefer other investment instruments like Mutual Funds please be my guest!

Tell to you the simple answer to my question posed in the above paragraph and the answer is yes, current stock market reports are able to influence stock market performance. Basically, it is silly but a current stock market report which basically recounts what happened in the stock market the day before and attempts to explain some of these stock market movements and then throws in some experts’ views on how the stock market will perform the following day, will have an impact on the day’s stock market price movements! So how do current stock market reports affect the stock market? If the report is littered with negative words such as collapse, dive, tumble, it will very likely cause stock market prices to fall that day. Very simple but true!

An economist, Paul Tetlock of the University of Texas at Austin, had actually conducted studies on the Wall Street Journal’s daily column “Abreast of the Market”, from 1984 till 1999. What he had found out was that the daily stock market report in the journal, if it had a high “pessimism factor”, would cause a fall of a 0.081 percentage point in the Dow on the next trading day. This compares with the average daily return of the index of 0.054 percentage points from 1984 till 1999.

Paul Tetlock had used a content analysis program to run through the current stock market reports in the Wall Street Journal. The program would calculate the “pessimism factor” based on the numbers of negative vocabulary found in the live stock market reports. According to the Harvard “psycho-social” dictionary, words can be classified into 77 categories depending on the mood they convey. If a current stock market report contains negative words like weakness, jittery, or uncertainty, the pessimism factor would thus be high. To summarise, these findings suggest that the media content serves as a form of investor sentiment that is able to affect stock market prices negatively.

Well the good news is the negative returns in the stock market reversed five days later! So if you ask me, buy stocks when there are bad live stock market reports in the news or papers, and when the stock market goes back up five days later, you would have made some profits!

The above observations are actually caused by the online stock traders who react to the live stock market reports and hence start buy or selling stocks and shares. There are actually two types of stock traders: noise stock traders and fundamental stock traders. Let me explain further the cause and effect in detail.

Noise stock traders would react to the negative stock market reports and sell their stocks, creating a downward spiral on stock market prices. This fall in stock market prices would then indirectly entice fundamental stock traders to come in and buy the stocks, as they do not see a change in the basic fundamentals of the companies in the stock market and hence cause stock market prices to go back up. So as mentioned, the live stock market reports present insights about investors rather than investments. The change in share prices mainly serve to convey investor sentiments towards the stock market before the new price is reflected.

In a separate study, two economists from the US Federal Reserve published a study on the relationship between consumer sentiment, the economy and the news media some time ago. They concluded that the news media and live stock market reports affected consumers (stock traders)’ perception of the economy in three ways:

1. The news conveys the latest economic data and the opinions of professionals to stock traders.
2. Stock traders receive a signal about the economy through the tone and volume of the news about the economy.
3. The greater the signal, the greater the likelihood stock traders will update their expectations about the economy.

Hence the start of a never ending cycle. Current stock market reports in the news and reports on the economy publish opinions from expert stock traders and market observers. This influences the public and online stock traders behavior which will cause changes to the stock market and eventually affect the economy. Live stock market reports thus can affect investor sentiment over a short period of time. If the negative news or stock market reports are persistent, this may have an greater impact on the economy in the longer term.

Now that I have talked about the overall live stock market reports, what about individual stock market reports? Does a negative or positive newspaper commentary on a particular stock have long term impacts on that stock’s performance in the stock market?

Concrete studies have not been done, but needless to say, if you are a smart investor, you will know that the answer is yes! However, in a study done by Malcolm Baker from Harvard Business School and Jeffrey Wurgler from NYU Stern School of Business, they have found that when investor sentiment turns from low to high, returns are higher on both extremem growth and distressed stocks. So you know what kind of stocks to buy when you see good live stock market reports!

Oh and the reverse is true too! This might be because investor sentiment actually refers to the speculation of stock traders. Sentiment thus drives the demand for speculative investments. The subjectivity of the stock valuations is claimed to be the reason why certain stocks are more vulnerable to broad shifts in the propensity to speculate. History has shown that young growth stocks are especially prone to bubbles and subsequent crashes. This is consistent with the observation that they tend to appeal to speculators and optimists.

According to a study done by Baker and Wurgler, they looked at several measures, such as share turnover, number and average first-day returns on initial public offers and equity share in new issues. Turnover and more generally liquidity can serve as investor sentiment. In a market with short-sales constraints, irrational investors participate and thus add liquidity only when they are optimistic. Hence, high liquidity tends to coincide with overvaluation.

So I have said my piece on stock market reports and I hope you have realized the advantages of reading current stock market reports. For your up to free stock market reports, please do visit the msn stock market report. With that I leave you to some current stock market report news and hope you pay attention and score big in the stock markets!