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Headline Risk

What is 'Headline Risk'

The possibility that a news story will adversely affect a stock's price. Headline risk can also impact the performance of the stock market as a whole.

Explaining 'Headline Risk'

For example, in the aftermath of the housing crisis, mortgage lenders such as Bank of America, JP Morgan Chase and CitiGroup faced significant headline risk.


One way a company can mitigate headline risk is through effective public relations campaigns. Successful public relations efforts can promote positive images of a company that can help counteract any negative stories as well as provide swift damage control if such a story is released. Individual investors can counteract headline risk by using a buy-and-hold investing strategy that ignores the short-term changes in the market that are triggered by headlines.





Further Reading


Catering to investors through security design: Headline rate and complexity
academic.oup.com [PDF]
… Such crisis episodes lead to daily headlines in financial newspapers such as “Risk Aversion Rises … are the episodes that are reported on in the news under the headline “risk aversion.” It … During this period, greater willingness to take on risk dampens measured risks and tends to …

Are oil price news headlines statistically and economically significant for investors?Are oil price news headlines statistically and economically significant for investors?
www.tandfonline.com [PDF]
… Such crisis episodes lead to daily headlines in financial newspapers such as “Risk Aversion Rises … are the episodes that are reported on in the news under the headline “risk aversion.” It … During this period, greater willingness to take on risk dampens measured risks and tends to …

Stock price reaction to news and no-news: drift and reversal after headlinesStock price reaction to news and no-news: drift and reversal after headlines
www.sciencedirect.com [PDF]
… Such crisis episodes lead to daily headlines in financial newspapers such as “Risk Aversion Rises … are the episodes that are reported on in the news under the headline “risk aversion.” It … During this period, greater willingness to take on risk dampens measured risks and tends to …

Headline Risk: Unexpected Price Changes and Answering to the Folks at the Top.Headline Risk: Unexpected Price Changes and Answering to the Folks at the Top.
search.ebscohost.com [PDF]
… Such crisis episodes lead to daily headlines in financial newspapers such as “Risk Aversion Rises … are the episodes that are reported on in the news under the headline “risk aversion.” It … During this period, greater willingness to take on risk dampens measured risks and tends to …

Asian Miracle, Asian Tiger, or Asian Myth? Financial Sector and Risk Assessment through FSAP Experience: Enhancing Bank Supervision in ThailandAsian Miracle, Asian Tiger, or Asian Myth? Financial Sector and Risk Assessment through FSAP Experience: Enhancing Bank Supervision in Thailand
papers.ssrn.com [PDF]
… Such crisis episodes lead to daily headlines in financial newspapers such as “Risk Aversion Rises … are the episodes that are reported on in the news under the headline “risk aversion.” It … During this period, greater willingness to take on risk dampens measured risks and tends to …

The last temptation of riskThe last temptation of risk
www.jstor.org [PDF]
… Such crisis episodes lead to daily headlines in financial newspapers such as “Risk Aversion Rises … are the episodes that are reported on in the news under the headline “risk aversion.” It … During this period, greater willingness to take on risk dampens measured risks and tends to …



Q&A About Headline Risk


What does the term "headline risk" also refer to?

The performance of the stock market as a whole.

What are some of the risks associated with investing in stocks?

Some of the risks associated with investing in stocks include inflation, interest rates and exchange rates.

How can individual investors counteract headline risk?

Individual investors can counteract headline risk by using buy-and-hold investing strategies.

How does inflation affect stock prices?

Inflation can cause a decrease in stock prices because it reduces the purchasing power of money.

What is headline risk?

The possibility that a news story will adversely affect a stock's price.

How do interest rates affect stock prices?

Interest rates can cause an increase or decrease in stock prices depending on whether they are increasing or decreasing. If interest rates are increasing, this means that investors will have to pay more for loans which may lead them to invest less in stocks and more in bonds instead. This would lead to a decrease in demand for stocks and thus their price would fall as well. On the other hand, if interest rates were decreasing, this would mean that investors could get loans at lower costs which might encourage them to invest more into stocks since they could afford higher risk investments now than before when they had to pay higher interest rate payments on their loans. This would lead to an increase demand for stocks which would push up their price as well.

Why is it important for individuals to use buy-and-hold investing strategies when dealing with headlines and other short-term changes in the market?

It allows individuals to ignore short term changes in the market that are triggered by headlines.

How can companies mitigate headline risk?

Companies can mitigate headline risk by using effective public relations campaigns.

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