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Stocks often drop excessively on just a little bit of bad news. Why?

April 26, 2017bad bit drop excessively little News stocks

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Stocks often drop excessively on just a little bit of bad news. Why?

1 Answer

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If one piece of bad news gets out, investors begin to fear that more bad news is lurking around the corner. Similarly, if one stock in a sector gets into trouble (especially if it is an event that could easily happen to any other company in the same business), there is a suspicion that others, too, will suffer. For instance, investor confidence in Internet companies took a beating after March 2000, when popular Web-based companies in the U.S. faced bankruptcy.