Barry Ritholtz, Columnist

Why Fake News Is So Harmful to Investors

Markets are different from politics; they punish those who believe what isn't true.

October 23, 2017 at 2:59 PM UTC

Barry Ritholtz is a former Bloomberg Opinion columnist. He is chairman and chief investment officer of Ritholtz Wealth Management, and was previously chief market strategist at Maxim Group. He is the author of “Bailout Nation.”

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Photographer: Michael E. Miller/The Washington Post/Getty Images

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Facebook Inc., Alphabet Inc. (Google) and Twitter Inc. are under scrutiny for the roles each played in Russia's attempt to manipulate the public and disseminate fake news during the 2016 political campaign. All three companies will face congressional questioners about their respective roles in the election-tampering investigation.

Consumers of political news are subject to the same sorts of biases and cognitive errors that affect investors.1508768926225 However, there is a significant difference between these two types of news consumers: Traders have a fast and measurable feedback loop -- investment returns -- that penalizes those who believe things that are not true. Partisans suffer no tangible losses when they indulge their biases, enduring nothing more than the occasional shock of being proven wrong on Election Day.