The Handbook of News Analytics in Finance

4.11 A CASE FOR REGULATED FINANCIAL NEWS MEDIA

There is a case to be made about what constitutes news coming from financial news media regarding publicly traded companies in the US. Given that the public perceives news articles coming from prestigious news sources as being “material” news, shouldn't these news articles abide by the same rules as the company they write about?

Take the following example, which unfortunately is a real-life example that happened a few years back. A prestigious news source wrote an article about a big public company that basically said the company's CEO reported that the market share for the company's products was going to decrease by 10% over the next year. The market reacted to the news immediately by bringing the stock price down by over 5%. It turned out that the news reporter made a mistake. The CEO was talking about the overall market decreasing by 10% and not about the company's market share, which he had actually forecast as going to increase by 10% or so. The publisher did update the story but the stock price took days, if not weeks, to recover from that first erroneous report.

Publicly traded companies spend a considerable amount of time and money before they release material information about the company. They do that because they need to abide by current laws and because they are aware of stock price implications.

Shouldn't financial news organizations be subject to the same rules and, yes, the same amount of rigorous attention and expense ...