Are we journalists doing a poor job covering financial news? Are we biased? Do we accentuate the negative?
The answer to the last two questions appears to be yes, while the jury is out on the initial question. That, at any rate, is the conclusion of a recently published study entitled “The Kinks of Financial Journalism”, by Diego Garcia from the University of Colorado.
Basically what he found was that journalists tend to be more negative about market falls than they are positive about market rises. In other words we seem to like bad news much more than good news.
Garcia’s study focused on coverage from the New York Times and Wall Street Journal from 1905 to 2005 but there is no reason to believe that these publications are any more or less biased than others.
The more he looked the more he found that as markets rose the language of journalists’ reports contained more or the less the same degree of positivity, however market falls provoked increasingly negative reporting. The accentuating of the negative cast a spell of gloom over the way this news was delivered.
Why so? Maybe the answer lies in the fact that the public is simply more interested in bad news than good news or maybe, as the famous studies by the psychologists Kahnerman and Tversky have shown, investors tend to be much more concerned over losses than they are over missing out on opportunities for gains. Journalists therefore are rightly scared of identifying buying opportunities, in case they go wrong but losses have already happened and so there is little reticence in reporting how and why they have occurred. Or to put it another way, have you ever heard complaints about a journalist’s failure to report buying opportunities?
And there is more to this because the reporting of bad news is what sells newspapers. You are most unlikely to see a successful newspaper running a headline with words to the effect of: “Stability maintained, outlook for the future good”. That sort of thing is confined to places where there is no press freedom and state media churn out relentlessly upbeat stories that few people actually read.
In 2014 the Pew Research Center reviewed 165 American media surveys to find which types of news enjoyed the greatest demand. War and terrorism ranked at the top of the list with bad weather coming in next, followed by natural disaster stories.
Yet when people are asked what they want from the media they often complain about media negativity and a lack of good news.
So, there is quite a big disconnect between what people say they want and what they actually want. This seems hard to explain but is not so difficult to understand when everyday discourse is bourne in mind. Come on, be honest, would you rather hear about how well your neighbour’s kids are doing in college or are you more interested to learn that one of them is having a torrid sexual affair? The only mystery here is that English speakers have to resort to a German word to explain what’s going on. The word, of course, is schadenfreude or revelling in the misfortune of others.
Newspapers are crammed full of bad news because that’s what people want to read and woe betide any editor that forgets this. However there is a more noble explanation for why newspapers busy themselves with bad news, not least on the finance pages where journalists are deemed to take on a watchdog role.
Time and again the misdeeds of companies and investment schemes have come to light thanks to diligent media reports. Not only is this in the public interest but it is also intrinsic to the role of the media. Journalists have to approach every story armed with scepticism and a determination not to be mere mouthpieces for what the rich and powerful want them to write.
And, let’s face it, there is also glory to be gained by exposing wrongdoing. The public loves to read these exposes and they most certainly perform a worthwhile function.
Therefore, of course, the media is biased, were it otherwise journalists would be reduced to the role of eunuchs trying to make sense of the news without being able to sort out the good from the bad. In the process we hacks come across as cynical but a dose of cynicism is far healthier than a lack of diligent reporting.
The trick, as ever, is to balance cynicism and bias with an appreciation for the facts, even when they are pretty hard to come by. Only the truly arrogant claim to consistently get this balance right.
Meanwhile standby for more negative reporting, not least because you, the readers, can’t get enough of it.
Stephen Vines runs companies in the food sector and moonlights as a journalist and a broadcaster