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Behavioral Finance

What is Sell On News?

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Sell on news is when a stock to goes down with positive news because that news has been predicted by the market. Predictable or rumored positive news drives investors to buy and wait for the news to become official. When enough investors take this stance, selling pressure can result when the news is actually released resulting in a price decline.

Example

A company has exceeded earning expectations in the forth quarter every year for 4 years. Each year the earnings came as a surprise and the stock went up by an average of 20 percent. In the fifth year, a large number of investors have recognized the pattern. The company exceeds published analysts expectations again but the stock declines as too many investors have purchased in advance of earnings in hopes of selling on the earnings date for a quick profit.
Overview: Sell On News
Type
Definition
The tendency for a stock to go down on positive news if that news has already been predicted by the market.
Also Known As
Buy on rumor, sell on news
Implications
Predicable good news doesn't necessarily increase a stock's price.
Related Concepts
Next: Efficient Market Hypothesis
More about behavioral economics:
Animal Spirits
Bubbles
Bull Trap
Capitulation
Dumb Money
Falling Knife
Freeriding
Greed Is Good
Home Bias
Long Squeeze
Mr Market
Noise Traders
Sell On News
Speculation
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