The U.S. equity markets are reaching highs not seen since 2007, and while such strength is a good thing, all that market heat is also driving poor trading behavior due to news reports and the pump-and-dump world of social media, warns the behavioral economics consultancy MarketPsych.

While price forecasts in the news media can create outsize profitability patterns in the markets, social media creates a "primal" form of influence over market prices, says MarketPsych Managing Director Richard Peterson in a March 16 blog post, "New Highs! Stock Promoters, Media Manipulation and Timing Price Reversals."

"We see that investors who follow predictions in both the news and social media lose significant amounts of money," writes Peterson, a Santa Monica, Calif.-based medical doctor and psychiatrist with expertise in behavioral finance. "Inversely, those who play against the media do much better."

Continue Reading for Free

Register and gain access to:

  • Breaking benefits news and analysis, on-site and via our newsletters and custom alerts
  • Educational webcasts, white papers, and ebooks from industry thought leaders
  • Critical converage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.