News releases concerning current economy or corporate stocks and commodities do not contribute any statistically significant edge for future price developments. While beautifully written and iterated, accurate and truthful estimates have yet to result.
News Relies on Hindsight
Prices move, and soon after news bulletins hit the public with a variety of explanations -- how’s, why’s, and what-if’s -- all after thoughts. Logically higher volatility calls for an earlier media release and vice versa. Again and again, this happens every day. It only requires a clock to confirm this progression of events.
Restating events via hindsight, when performed efficiently, can project the illusion of higher understanding and perhaps superior deduction. Those who have fallen under the spell of famed personalities often trust the publicly made opinions as absolute truth, despite that the opposite could turn out just as likely. Given that some can provide semi accurate accounts of historical market action, it still does not have any relevance to future uncertainties.
Lack of Incentives
The releases originate from news writers employed by media corporations, not public investors. Mentioned in Unreliable Analyst Recommendations, no incentive exists for the industry to earnestly help audience investors live through the markets profitably. The stations’ primary objectives remain to entertain while imposing authority on the stressed topics, keeping the viewers or listeners away from the dial, and hopefully going through the subsequent commercial breaks.
Forgotten Misses
Every time media personalities make claims regarding future prices or volatilities, they do them on a “hit or miss” basis. Regardless of accuracy, they lose nothing monetarily. It could all be guesses out of thin air. This explains how to the seasoned trader, many price move rationales repeated over the news appear more like nonsensical babble; imagine hearing “The DOW gained 300 points early in the morning as scientists make soup out of new broccoli species…”.
The scheme works simply like this. If the underlying claim becomes accurate, they boast about it on air as loudly as possible making sure that all viewers become aware and accept the guise that the alleged service could bring along fortunes in the future.
Since the media industry expects average audience demographics to have a short attention span along with forgetfulness of details, if the earlier forecasts were incorrect; denial becomes the name of the game, and wrongful claims soon forgotten. The truth is ugly.
News Creates Public Sentiment
TV, radio, and Internet news outlets serve to entertain and profit off advertisement, even the finance centered entities. News releases often lead to extreme public sentiments, which professionals use as part of contrarian indicators. The retail investor would find no value to incorporate media content as part of security price forecast strategy.
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