The News Media
The history of speculative bubbles begins roughly with the advent of newspapers. 1 One can assume that, although the record of these early newspapers is mostly lost, they regularly reported on the first bubble of any consequence, the Dutch tulip mania of the 1630s. 2
Although the news media—newspapers, magazines, and broadcast media, along with their new outlets on the Internet—present themselves as detached observers of market events, they are themselves an integral part of these events. Significant market events generally occur only if there is similar thinking among large groups of people, and the news media are essential vehicles for the spread of ideas.
In this chapter, I consider the complexity of the media's impact on market events. As we shall see, news stories rarely have a simple, predictable effect on the market. Indeed, in some respects, they have less impact than is commonly believed. However, a careful analysis reveals that the news media do play an important role both in setting the stage for market moves and in instigating the moves themselves.