It’s not uncommon to see stock prices fluctuate based on what appears in the news on any given day, but what if the news that investors are planning their strategies from isn’t true?

That’s what Dr. Matthew Brigada, Associate Professor Finance at SUNY Poly set out to examine in “Fake News,” a paper published in November 2017 in the North American Journal of Economic and Finance – a paper that has gone on to become the most downloaded paper from the journal in recent weeks.

In the finance-focused paper Dr. Brigada looks at what led to the events of Tuesday, July 14, 2015, as well as the aftermath. At roughly 11:39 a.m. that day, Twitter common stock jumped nearly 8 percent on news that there was a $31 billion bid for the company. Media outlets began sharing the news of the takeover bid, including Carl Quintanilla of CNBC. Within five minutes, Dr. Brigada points out, Quintanilla informs his audience that the site the takeover news was coming from was a hoax—and not actually Bloomberg News. Dr. Brigada says the stock market then reacted in kind.

Dr. Brigada, along with paper co-author, Dr. William R. Pratt, Assistant Professor of Finance at Oklahoma City University, analyze how noise trading (the buying and selling of stocks without the use of fundamental data) and informed trading (buying and selling with the use of data) plays out in the equity and option market.

“We find reaction to the fake news occurred in the equity market, and the option market reacted with a delay. This differs from many analyses of actual news events, which found informed traders prefer the options market, and information from their trades then leaks into the equity market,” the authors state. “We conclude uninformed traders, and those aware of the hoax, prefer to trade in equity over option markets. This result has implications for isolating informed trading around actual news events.”

The North-American Journal of Economics and Finance publishes high quality original manuscripts in financial economics. Areas of interest include, but are not limited to, financial intermediation and capital markets, law and finance, asset pricing, global and regional integration of financial markets, capital and security markets, corporate governance, information and security markets, behavioral finance, corporate financial policy and financial econometrics.

“Fake News” by Dr. Brigada and Dr. Pratt can be found here.