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Fake news isn't just a problem for politics—it's also wreaking havoc on financial markets. A new study reveals how deceptive information is being used to manipulate stock prices, causing real financial damage to investors.

The study, published in December 2024 in the��, finds fake financial news has been on the rise, especially in the years following the 2016 election. According to��Austin Moss, assistant accounting professor in the��Leeds School of Business and co-author of the study, fake news in the stock market is typically designed to deceive investors about the true value of a company’s stock.

Austin Moss

“Without any proof or facts, (fake news authors) often allege that a company is engaging in fraud or falsifying earnings,” he said.

Moss and co-author Betty Liu, assistant professor of accounting in Indiana University's Kelley School of Business, highlight an example in the study involving the real estate company Farmland Partners. In 2018, a single false report claiming 310% of the company’s previous-year earnings were fabricated caused the stock price to drop by over 40% in just one day, wiping out tens of millions in market value.

Such deceptive stories have real-world impacts, Moss said. Fake news can manipulate stock prices, leading to short-term volatility while also eroding long-term investor confidence.

How fake news moves markets

Why do investors fall for fake news? Moss suggests that in the fast-paced world of financial markets, speed is key. “Investors are often so eager to react to information before anyone else that they don’t verify it,” he said. “That rush to act leads to false claims having a real, immediate impact on stock prices.”��

The study found companies with less transparent financial reporting are more vulnerable to manipulation. “Fake news authors choose firms that are hard to understand,” Moss said. “Companies that provide less forward guidance and have more complex financial statements are easier targets.”��

The researchers examined the timing of fake articles relative to earnings announcements. They found fake news authors tend to publish more articles in the days leading up to quarterly earnings releases, capitalizing on the heightened attention surrounding these announcements.��

“Leading up to these big events, there’s a lot of attention on the company’s results. This is when uncertainty about the company is highest, and that’s when fake news can reach a wider audience,” Moss says.

But once the actual earnings report is released, fake news loses its power, as fresh, reliable data takes over.

By analyzing the content of 125,475 crowdsourced financial articles from platforms like Seeking Alpha, the researchers found 57% of fake articles discussed accounting-related topics. Compare that to genuine articles, where 88% of the articles focused on accounting.

This suggests that while fake news often seeks to exploit accounting details, it is less likely to be as information-heavy or grounded in verifiable data.

Incentives to spread misinformation

Fake news authors spread disinformation for a variety of reasons, Moss said.

Some want to manipulate stock prices to profit from short-term positions, much like classic pump-and-dump schemes. For example, in the case of Farmland Partners, individuals behind the fake report had taken short positions before the article’s release, betting that the stock price would fall.��

Others create content for online platforms that reward clicks and views, capitalizing on sensational headlines, and still others do it for ideological reasons—even just for the enjoyment of “trolling” investors, Moss said.

The authors often hide behind anonymous profiles, he added, “so there's really no or very little reputational cost to producing this fake news since no one can easily find out who this person is.”

Focus on transparency

To mitigate this growing problem, the researchers suggest companies focus on increasing transparency, offering clearer guidance and ensuring their financial statements are easily accessible and understandable.��

“If firms provide more transparent information, it makes it harder for fake news to convince the market,” Moss said.

For individual investors, Moss advises caution and verification. “If you see a claim that seems too outrageous to be true—like an unrealistic jump in earnings or a wild accusation about a company—check the company’s financial statements,” he said. By comparing these reports to the claims being made, investors can identify discrepancies and avoid falling for fake news.��

He also warned that the period before earnings announcements is particularly risky. “In the three to four days before earnings announcements, that’s when fake news is most likely to spread,” Moss cautions.��

Finally, be wary of publications or websites that crowdsource their articles, he added. Skepticism is one of the best defenses investors have against the manipulation of stock prices by misinformation.