High frequency traders or big players can manipulate stock prices. There are various popular & fastest ways big investors spread rumors in stock markets.
These rumors can suddenly push stock prices higher or lower within no time. But, it can cost heavily to the portfolio of small investors who got trapper in wrong direction.
According to an interview of Jim Cramer published in TheStreet, stock market manipulation is a fact. Hedge fund managers can push stocks higher or lower with as little as $5 million in capital.
He described that one of the best strategy to keep a stock price down is to spread false rumors to reporters. Big investors often manipulate the stocks by creating shorts.
It is even true for fundamentally strong stocks for the purpose of shaking weak hands before a good upside. Small investors should always remember that chasing rumors is a fool’s game. However, it is great for media headlines to lure public.
Stock markets regulators such as SEC (in US) or SEBI (in India) should spend more time thinking to stop rumors as early as possible. Here are 10 fastest ways big investors spread rumors in stock markets:
[You can also watch an exciting video on this post at the end page of this post as well as at GetUpWise channel on YouTube.]
(1) Opinions Of Credit Rating Agencies
It is one of the most significant & fastest ways big investors spread rumors in stock markets. Credit rating agencies are reputed agencies that determine the creditworthiness of bond or debt issuers.
Some of the biggest credit rating agencies controlling 95% of rating business include Moody’s Investors Service, Standard & Poor’s (S&P), and Fitch Ratings.
Their primary role is to rate the risk of defaulting on debt & other credit-related securities. This information is considered useful for individual & institutional investors. It helps investors to make profitable decisions in bonds or securities.
According to a post published in Investopedia, these rating agencies truly failed in their roles of providing accurate credit ratings on a timely basis.
It is perhaps due to potential conflicts of interest or serious mistakes in the model of issuing ratings for securities. This business model requires issuers to pay credit rating agencies to rate their securities.
This could adversely affect the authenticity of the final outcome of the rating process. Similarly, these agencies are slow to catch corporate frauds or attempt to hide liabilities on balance sheets.
Thus, investors should not rely solely on their opinions as operators can misuse them. You should perform your own diligence in determining safety levels of debt & related securities.
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