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They are all about information and there's a plethora of possibly important news. But can we trust it? Or, rather, do we act as if we trust it?

We've learned the concept from politics. Four years ago, fake news related to the US presidential election reached an estimated 126 million Americans, according to Facebook. Researchers found that roughly half of those who recalled seeing fake news believed it.

Alas, financial markets are not immune to fake news either. I've seen cost estimates to the tune of tens of billions of dollars. But what really happens? A crackdown from the US Securities and Exchange Commission (SEC) three years ago provided a natural experiment for researchers who wanted to see how financial markets responded.

The SEC crackdown covered 27 stock promoters who were paid to write fake news articles on listed companies, many of them on the website Seeking Alpha. If indeed there was more than a kernel of truth in these articles, they still violated a rule that requires disclosure of any such compensation arrangements.

According to an article in the journal Information Systems Research (Clarke et al.), fake news articles generated some 83 per cent more page views than legitimate news articles. The researchers also found that article commenters were unable to identify fake news stories., although linguistic algorithms might have cracked it. And, yes, there was a significant increase in trading volume on the day a fake news article was released. Their sample included a total of 383 such articles.

However, and here's the good news (not fake): Overall, the market seems to do a fair if not perfect job of separating the wheat from the chaff. The abnormal trading volume was less than that observed for legitimate news articles – and so was the magnitude of the stock price reaction.

This, of course, presupposes that all fake news articles were in fact detected. We'll take that on faith.

And September? A modest retreat in global stock markets, somewhat higher bond spreads, and weaker Norwegian kroner, providing a cushion for our Norwegian investors. A perceptibly apprehensive market – perhaps in anticipation of more fake news of some significance?

Fund updates for September 2020

Pareto Investment Fund
The stock markets did not shine as much this month as in previous months. Norwegian equities moved sideways, while the fund did somewhat better.


Pareto Aksje Norge
After 25 years of managing Norwegian equities, it is tempting to have a go at some reflections.


Pareto Nordic Equity
Nordic equities had another good month in September, thus ending the quarter with strong growth.


Pareto Global 
Pareto Global's portfolio combines company growth with a relatively low valuation in relation to current earnings. With this as a backdrop, September was a good month relative to the market.


Pareto Nordic Return 
Pareto Nordic Return rose for the sixth month in a row, after Nordic equities ended a strong quarter with a solid development also in September.


Pareto Nordic Alpha
The fund had a good month, with many companies contributing to the positive return.


Pareto Nordic Omega
The fund had a good month, with many companies contributing to the positive return.


Pareto Nordic Corporate Bond
Overall the fund is up for the month, with relatively good performance.


Pareto Nordic Cross Credit
With some strong days towards the end of the month, September ended up looking satisfactory.


Pareto Global Corporate Bond
The issue market was active, and the fund participated in both the HY and IG segments to continue the portfolio work and spread the holding risk across both sectors, geography and specific names.



Historical returns are no guarantee for future returns. Future returns will depend, inter alia, on, market developments, the portfolio manager's skill, the fund's risk profile, as well as fees for subscription, management and redemption. Returns may become negative as a result of negative price developments.

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