Broad research finds political polarization in financial news can influence stock trading

Financial news is often assumed to present objective information about companies and markets. But new research from Michigan State University suggests that even corporate financial coverage can reflect political polarization, and those differences may influence how investors interpret news and make trading decisions.

The research, published in the Journal of Financial Economics, is the first to show that political polarization exists in financial news, which stirs up disagreement among investors in a new way. And this disagreement results in a 30% spike in daily stock trading volume.

In a new video feature from the Broad College of Business, Ryan Israelsen, the Kaufman Endowed Professor in Insurance and Risk Management, explains how political differences can shape the way financial news is reported and how those differences influence investor decisions in the market.