yahoo finance news

yahoo finance news

The Impact of Yahoo Finance News on Investment Decisions

1. Introduction

One of the most important issues in finance is how investors evaluate business news and how this event affects stock prices. Small investors receive information through insecure or delayed channels and must rely to a large degree on mass communication channels like newspapers and television. The internet has been the most recent addition to the mass communication channel. Not only does the internet allow instant two-way reception of news, but online investors also have other advantages, most notably the opportunity to use information presented on the internet to make detailed decisions on investment trading. Recent studies have demonstrated that the internet is an important tool to facilitate investment decisions. Some early works suggested that internet activity had significantly improved stock prices. After a thorough evaluation of the connection between internet flow and stock prices, prices of virtually all traded stocks and some non-traded shares were investigated.

Information found on the internet can be an important resource for new and smaller investors. Although it would have been difficult for many individual investors to gain access to the same financial information that institutional investors receive in the past, modern technology has empowered investors. The widespread use of the internet in financial markets has broadened the participation of investor groups, including those with little or no financial market experience. On the internet, information is now free for any group of investors. More importantly, the internet gives small investors simultaneous access to the same information as institutional investors, which might allow small investors to make better investment decisions.

2. The Power of Yahoo Finance News

The Institutional Ownership Study enhances our confidence that even sophisticated market participants are affected by Yahoo Finance news. These news announcements are also catered to meet the preferences of retail investors studying the critically underestimated channel through which stock news affects stock prices. Unlike the direct-channel view, the indirect-channel view does not imply the overvaluation of stock news. Although the direct channel theory can be applied to stocks, it is definitely much more catered to the overvaluation of funds investing in stocks as an indirect consequence of the more readily tradable news. Fidelity mutual fund investors also judge stocks based on the overvalued market prices, and both the stocks and stock news are treated accordingly.

The power of Yahoo Finance news: An increasing number of individual investors begin to use internet news to consult before making their financial decisions because of the deregulation of online brokerage in 1995 and the development of internet technology. Additionally, the increasing numbers of diverse investors in Taiwan, due to the Bluechip peaking and the bond rate falling, have contributed to this trend. According to the Aggregate Investor Behavior Study by Huang (2008), novice (under-diversified), highly involved, and frequent traders are more likely to use internet news and react to the news more abhorrently. Market participants, like arbitrageurs, who have no diversification to smooth the conflict between client demands and the pessimism between dealing with the company’s long-term investment options and short-term demands, are also influenced by these news sources.

3. Factors Influencing Investment Decisions

In the same sense, related studies performed by Kitchens et al. have also recommended that media-induced news can affect stock decision-making. Misnumbered reviews and public relations of the results by the media, following the release of corporate press, during earnings announcements in the United States market, are significant to individual investors. Public relations are vital to transmit the necessary information. Vanitha et al. evaluated that mass media or the internet stock are affected by two factors: investor’s overconfidence and investor sentiment. Furthermore, the media influence of news trading behavior and returns on individual investors is positively related. Besides, they stated that individual investors can use the adverse pushes of media-induced news to make investment decisions in securities. Therefore, they recommended that individual investors could benefit from both differences in attention to news and inattention trading strategies after analyzing possible customizable relationships with international funds between media news data releases and the U.S. stock. Influence activates various investment behaviors, such as security valuation and market over-collaboration, accelerates expensive arbitration, affects the stock trading volume, and leads to overselling.

Further examining whether media has an impact on the portfolio formation process as well and has a significant performance difference for individual investors, also due to the investors’ knowledge of related industry experiences, Yi Zhang et al. concluded that more trading activities following the release of negative – either negative or positive – financial news were observed and that mass media provided publicity, attracting investors’ attention to such news. Therefore, Yi Zhang recommended that stock investors could use the small price difference and the negative feedback strategies that were based on the possibility that investors made irrational decisions while considering media-induced news to obtain abnormal returns.

Investors make investment decisions while considering multiple aspects. Media is one such factor, which provides real-time financial news to investors. Existing research is divided on the impact of media on stock markets, although it is one of the critical decision-making factors for investors. Previous studies provided evidence both supporting and opposing the stance that media-induced news stimulates an investor’s decision-making process. Lee et al. had stated that media plays a misleading role in stock markets and can adversely affect the market when a lack of opposing information sources occurred, although their study concentrated on stock trading while the investor has already formed their view.

4. Analyzing and Utilizing Yahoo Finance News

Every news article lists the sources of its information, such as: The Business Wire, GlobeNewswire, Marketwire, PR Newswire, ACCESSWIRE, PRWeb, New Media Wire, and Publish Newton. Utilizing market sources beyond only Yahoo Finance (i.e. the sources listed in the news articles) encourages broad examination and then buy/sell orders can be placed conservatively. Independent research can be done prior to trading, and stop-buy as well as stop-loss orders should be included in every portfolio because of their capability to “enhance overall trading ability and risk management.”

Yahoo Finance news can most certainly be utilized by investors if they do their own due diligence work as well as placing buy/sell orders conservatively. As this can be illustrated in our earlier examples, some news about a company can be quite staggering and can affect investment decisions. In our earlier examples, we also demonstrated that after a news article has been released, the stock can continue to trade higher (on good news) or lower (on bad news) for 15-20 more minutes. This phenomenon supports our conclusions of conservatively placing our buy/sell orders (for a fraction of the shares owned) when the market reaction is still growing wild right after a news article has been released as opposed to very stubbornly placing orders in close proximity to the closing prices. Also, utilizing news articles from Yahoo Finance can transform into profitable “day trading.”

5. Conclusion

In line with most prior research, it is not the volume of information, but the nature of the information that has predictive power for investors. The nature of the news has been analyzed in terms of investor sentiment, stock-cash flow expectations, and rational discourse to discover that the split between rational table talks, price momentum, or speech acts partially mediates the jump in stock price jump and earnings revisions when Yahoo Finance news is published and has predictive power for changes in liquidity and the clearing price of jump in stock prices. Paraphrasing, Erie and Jakub show that negative MACDs lead to a reduction in investor attention and sentiment, which in turn has an adverse effect on the stock price efficiency. In addition, the conditional accruals increase after the news release. Therefore, manager discretion in the news release can reduce the price efficiency.

Conclusion: Extant research on different media types has resulted in mixed conclusions and has required substitution of suitable proxies to reverse engineer the meaning of what was said in these heterogeneous information sources. Moreover, the literature has a natural bias when it comes to analyzing the effect of various media on quoted prices. As Yahoo Finance is a natural go-to place for information on quoted companies, that literature shows that sentence alone, information volume alone but also in combination predict price changes, is expected. The paraphrased news itself is analyzed for the firm’s future prospects, measured in terms of earnings, continuous guidance, credit rating, or bankruptcy, and link investor attention to changes in idiosyncratic risk. Regarding trading volumes, the same special focus as for price changes statistics has been put “on real-time trading activity and subsequent transaction cost, including market fragility and excessive order imbalances before the publication of major corporate news events, but distinguishing across asset classes it is found that information volume increases all, and noise trading volume only for stocks/sovereign bonds”.

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