For most companies, just getting mentioned on CNBC is enough to send stock prices rising -- and it doesn't seem to matter if the news is good or bad.
A recent study from a Ph.D. candidate at UC Berkeley shows that a company's stock price is likely to climb if that company is named on the business network CNBC. And it doesn't have to be in the context of a compliment: Prices show a tendency to rise even if CNBC is reporting something negative about the company.
The findings may strengthen the suspicions of anyone who believes that media coverage has a distorting influence on the market. And they may be cause for exasperation for anyone trying to decode the movements of stock prices -- a game that has lately become harder to play, with rampant economic uncertainty leading markets to show as much volatility in 2011 as in any year in recent memory.
Reza Shabani, the author of the paper, offers a few different theories for why bad press on CNBC might result in a price bounce for a company's stock.
When a company is mentioned on CNBC, Shabani says, it reminds investors that the company exists. Some investors might decide they want to own stock in that company, and thus buy it, while others might decide they no longer want to own stock in that company, and sell it.
The key point, according to Shabani, is that any investor can buy stock in the company, while only those who already own the stock can sell it. Therefore, the net effect tends to be a buy-in for the stock and a rise in share prices.
Shabani's paper isn't the first time CNBC has been linked with significant market movements. Critics have long accused the network of amplifying and accelerating trends in the market.
In 2001, the financial columnist James Surowiecki wrote in The New Yorker that CNBC "distorts the way the market works and helps turn what should be a diverse, independent-thinking crowd of investors into a herd acting upon a single collective thought." And years later, Daily Show host Jon Stewart charged CNBC with fostering an atmosphere of irresponsible exuberance that hastened the financial crisis.
But CNBC isn't the only media outlet thought to wield an outsize influence on the markets it covers. Indeed, research suggests that any financial journalist can cause investors to hear the news a certain way through something as simple as her choice of metaphors.