Anyone watching the stock market has seen this: A post hits Twitter containing old news, and investors react as if it were new.
A working paper by researchers at Oxford University suggests the phenomenon is prevalent, creating a source of excess volatility for investors. It found evidence that the unmediated flood of news and opinion that pours over the social media transom results in some stocks getting whipped around for weeks by the same facts.
Like many academic studies into equities, the Oxford one examined theories calling into question the market’s ability to process information with perfect efficiency, in this case something called the “stale news” hypothesis. It says that investors probably aren’t the automatons of rationality depicted in classical market models when they can’t even recognize when a story has been reported already.