If you're a stock trader or investor, then you definitely surely have experienced market over reactions in the past. A story breaks, and when you even get to learn the first word of the content the stocks related to that story have previously taken huge jumps up or down. I have already been trading stocks for a serious while now, and have experienced trends for sure. I believed I'd explain why I think markets, particularly the stock market over over reacts to both good and bad news almost instantly. Be warned that this isn't something I trade on, as I'm more of a long term investor/trader, nor should you read too deeply into my reasons. 2 Reason the Market often over shoots it's target on news:
#1 The Media Often Overreacts
As with any news story, if the media thinks it can gain your viewership by reporting on a one sided basis, they usually will. The media is noted for their exaggerations sometimes, and its part of every reporters thinking. The larger the news story, the more individuals who listen in, so, even if your media outlet claims to be fair and balanced, they will probably over hype, or over respond to many breaking stories. Due to the media's overreaction, investors usually overcome excited and either buy or sell stocks linked to the given news story for prices well above or below it's eventual target price.
#2 Panic
As traders see a breaking news story which will affect an inventory, they panic, and instead of taking even just a couple of minutes to learn the entire article, or listen to the entire news broadcast, they hit the buy or sell button with regards to the story's baring on the stock. Sellers, if negative, or buyers if positive flood the market, pushing an inventory in a single direction before the general public becomes aware of all of the details and more rational minds bring the stock back from the extreme it really hit.
As a trader you've to sometimes sit out and have patience before you, yourself have all the information necessary to create an educated rational decision. Ignorant decisions based on quick glimpses of over hyped media will surely lose you money in the long run https://scamrisk.com/stock-stories/.
