Market volatility: Fake news spooks trading algorithms


Fake news and inaccurate headlines may have contributed to recent stock market volatility, as trading algorithms try to interpret market-related news.

Hugh Son, at CNBC reported that in a note written to clients by J.P. Morgan Chase’s top quant, Marko Kolanovic, blamed a media landscape that’s a mix of real and fake news, which makes it easy for others to amplify negative news. The effects can be seen that, in spite of a booming economy and positive signals, the markets are reacting strongly to this mix of negative news.

“We trace the disconnect between negative sentiment and macroeconomic reality to the reinforcing feedback loop of real and fake negative news.” . . . “If we add to this an increased number of algorithms that trade based on posts and headlines, the impact on price action and investor psychology can be significant,” Kolanovic said.

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Source: ZDNet