NC State Economist Dr. Mike Walden – News and Stocks

Although some say it’s a lost cause, many investors are constantly trying to predict patterns in stock prices. Recently a study focused on the impact of the news stories on stock prices. N.C. State University economist Mike Walden outlines what the study found.

“This was a very, very interesting study. The researchers looked at news stories from the Dow Jones newswire, and they looked at stories that they thought would affect stock valuations. Now one thing they found was that only about half of those stories, those business stories, seem to be relevant for stock valuations, and those (that half) didn’t have any impact on stock prices.

“But they found that the other half could move stock prices. What they found was that news about deals, business deals, and potential new partnerships, generally, were received by the stock market in a positive way. That is, they tended to move stocks up in value.

“In contrast, legal news tended overall to be viewed as negative for the stock market, in the sense that legal news tended to be associated with declines in stock value.

“So, I think the bottom line here is that, first of all, not all business news has an impact on stock values. But much of that business news does. And depending on the content of that news, that news can move stock prices up, or it can move stock prices down.”


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