How fake news can affect the energy markets

It is often presented as if it was created by legitimate news organisations, while deepfakes, slanted reporting and selectively cited sources add further confusion.

Forex Suggest, a trusted provider of factual, up to date trading information, in this article explores ways in which fake news can hit the energy markets.

The effect of fake news on the markets

There have been reports of fake news claiming to provide impartial financial analyses.

But maybe the market would right itself. Unlike the average investor, a professional would likely be able to spot misleading content and swiftly sell shares if the price of a company's stock rose due to false information, bringing the price back down.

Unfortunately, it’s not that simple.

Nowadays, the media landscape is plagued by the prevalence of fake news. Studies have shown that fake articles posted on financial websites can influence stock markets and trading volumes.

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As such, the same methods used to manipulate political opinion have also been applied to the financial markets through the dissemination of fake news.

For the equity shares of firms included in these fake new articles, fake news boosts trading volume and price volatility compared to non-fake news.

Consistent with the theorised indirect spillover effects of fake news, analysts have found an instantaneous drop in responsiveness to all material, including legitimate news, on these platforms – once their existence was revealed to the public.

Understanding a false market

In a false market, prices are artificially inflated or artificially depressed in order to impede fair and effective bargaining. Whenever false information obscures a market's genuine worth, wild price swings are inevitable.

Accurate information shared and disseminated to all stakeholders is crucial to the stability and growth of financial markets, it helps investors make educated decisions and gives businesses a fair valuation.

When presented with reliable data, buyers and sellers may make educated choices.

If this data is fabricated or supplied inaccurately, as with fake news, people will make decisions based on false premises. Investors who are led by faulty data to make investing decisions are more likely to overreact to or ignore important developments.

Due to the irrational behaviour of a minority of investors, the market as a whole is distorted, and the genuine value of an asset is over or understated.

How to spot fake news before making a trading decision

If a financial news source is biased in favour of a political party or candidate, it could influence investor confidence in that party or candidate through the use of emotive language.

Whether it's a financial report or the latest headlines, it's always smart to verify the accuracy of a statement with a reliable source.

Whenever possible, a reliable source will provide further resources for further investigation; however, you should still verify the reliability of these external connections yourself. Finding the truth in stories and navigating the biases inside them takes effort.