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The Wisdom Of The Crowd: what does it tell us in times of market disruption?

The world is confused and panicked about COVID-19. We don’t know how this will play out, but a pandemic of this magnitude is not unprecedented. In the early twentieth century the Spanish Flu infected about a third of the world’s population and caused anywhere between 17 and 50 million deaths. The “Asian Flu” of 1957 and “Hong Kong” flu of 1968 – with estimated death-tolls of up to 2 million – both occurred in a more recent past. Yet, we should be careful when making comparisons as medicine and globalization have come a long way since. Another important factor to consider is the advancement of information technology. Whilst it is true that this allows for more effective combating of the outbreak, it also enables the spread of fear. 

The amount of information available today is truly overwhelming, and the situation is changing so rapidly that the data used to traditionally measure the economy is out of date as soon as it is produced. This creates uncertainty, in the face of which humans are notoriously bad at assessing risk. In this white paper we turn to news analytics to illustrate how the spread of opinion affects confidence in the stock markets.

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