Hearts, Minds and Algorithms: How Your Press Releases Influence Trading Patterns
The importance of effective communication in attracting investors is well understood by today’s investor relations managers – and one of the oldest and most widely used methods of communicating with the masses of the market. capital is to issue a press release. Companies issue press releases when they seek to spread their message widely using company websites, social media platforms, and news agencies that distribute the information to journalists. Now it seems that this ancient tool is taking on a new meaning.
Since the 1980s-1990s, when transactions began to be executed electronically, there have been constant efforts to increase the speed at which transactions can be executed. After all, the faster you are able to establish your position, the more profit you should expect to make when reacting to a change in the market.
Today, with the increasing adoption of new technologies and the introduction of tools like artificial intelligence, institutional investors are creating new algorithms capable of processing millions of words and making buy/sell decisions in a few milliseconds. It is estimated that 60-70% of all stock trading is done algorithmically. So what does this mean for investor relations teams building content in 2022?
The story of two investors
Today’s IRO should be aware that there are now two broad audiences for online communications. The first is the algorithm. Algorithms scour the web for information that mentions stock symbols and important keywords or phrases such as “success,” “beat profits,” and “improved forecast.” The algorithm then looks at key indicators of a stock’s performance and makes the decision to buy or sell. Everything happens in less than a second.
Then there are the living institutional and retail investors who will analyze a limited amount of information (at least relative to the algorithm), evaluate a ticker’s pattern, and make a buy or sell decision. But since humans will never be faster than an algorithm to buy or sell based on news, live investors are more likely to react to both news and stock price movements and will make their decision based on more about the long-term growth of a business. potential.
You might ask yourself, “If we see stock prices doing well for companies that are putting out loads of press releases, should we flood the feed to try to boost our stock price? The short answer is no!
Develop the winning strategy
While there may be some benefits to keeping your name in the headlines, there are several reasons why you should consider limiting the frequency of your press releases:
- Algorithms will change and improve – Like Google’s search engine algorithms, investors’ algorithms will be better at distinguishing relevant news from fluff, so a strategy based on frequent press releases is unlikely to work in the long run.
- Real hard-hitting news will get lost – If you want your most important press releases to have a big impact on the investment community, limit the number of less newsworthy and non-newsworthy releases.
- You will lose your (human) audience – If you continually ask investors to spend their valuable time consuming your non-newsworthy posts, you run the risk of tricking them into ignoring your content. Worse still, you will lose credibility with your media partners and industry influencers
- Protect your team’s assets – When you communicate too much, the investor relations team has to spend more time managing the clutter and reiterating critical elements of the company’s value proposition when corresponding with the investment community.
- Preserve your business reputation – Investors will begin to question the validity of the company if they believe the management team is spending too much time releasing poor information rather than achieving major business milestones. Excessive use of the press release can lead investors to wonder if the company is trying to cover up poor performance with public relations campaigns.
Knowing that algorithms play a vital role in today’s market and how publishing press releases can impact those algorithms are important pieces of information for IROs. Distributing press releases for the right reasons and using keywords that appeal to both algorithms and human investors are keys to a successful modern press release strategy.
Alyssa Barry is director and co-founder of irLabs