The media has a strong influence on investor risk tolerance, particularly now that news is 24/7. Investors can now make assessments based on a wealth of information provided in the media, including the DOW Jones and various news stories about the future of a company. Social media plays a big role in the development of these news stories, making it more and more difficult for investors to “turn off” – there is so much information available that risk tolerance goes down because investors are likely to exercise extra caution (Baris & Warshall, 2004). In contrast to this, some investors may have a higher risk tolerance because they are able to make judgments based on this increased level of information.
Futures have to be considered carefully based on the information available. A future like an e-micro British Pound/American Dollar future, for example, would be a good investment for someone who has an intimate knowledge of political issues, international relations, and the impact that this has on world currency rates. This is because currency and the relationship between currencies is highly related to the impact of politics and international relations, as well as the macroeconomy.
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Discussion Response
This post is interesting as it highlights several interesting things about the impact of the media on investments and investment risk. It would be interesting to see more about why you think the media has more of an impact on investment risk than the media, as you mentioned this but did not say what the potential influence of the government is. I would also like to know more about soybean futures and why this would be a good investment for someone that likes hedging. Overall, this was a very informative and interesting post about the impact of the media and social media on investor risk tolerance and how the presentation of information about futures, earnings, and management have on the way that investors approach risk.
- Baris, J., & Warshall, A. (2004). Investment Company Governance. Journal Of Investment Compliance, 5(2), 16-22. doi: 10.1108/15285810410636064
