Book Review: The markets and The media

This post is a review on 'The Markets And The Media' by Thomas Schuster. It can be borrowed from NLB (at 332.63222).

The book has three chapters, a afterword and tons of references since the three chapters are drawn from many sources: academic papers, books and articles etc.

Basically, if you are interested in how the media may influence the market, you may want to read the book. And perhaps if you have read Nassim Taleb's book(s), you may better understand why Taleb prefers to read literary stuffs than to be exposed to the media after you have read 'The Markets And The Media'.

Learning points:
1) The book explains that stock recommendations by the media (tv shows, newspaper, internet forums) tend not to outperform the market (indices). The stocks mentioned in the media may have moved before their appearance in the media. Hence any news on the stocks may have already reflected in the prices.

2) It is difficult to explain stock price movements using media as the main reason. There are times where significant news occur with little market movement and times where significant market movement occurs with little significant news.

3) The media tend to emotionalize the news due to the competition in the media industry as emotionalized news would grab more attention. Certain news may also be repeated in several media at different times.

4) The emotionalized news and its repetition may be part of the reasons why media can lead to increased feedback effects, further amplified market movements and thus adding to the boom/burst cycle in the market. Hence the media can be a destablizing factor to the market.

5) Due to the reflexive interaction between the media and the market, an upmarket would tend to lead to increased optimistic news in the media. An optimistic media may lead to a more optimistic outlook on the market. These cyclic influences may play a role in the formation of the market euphoria. Similarly, pessimistic cycle may play a role in market crashes.