Everywhere that I go, I got people I know, who got people they know

The Daily Options Report ran a story about a study that indicated that stock movements and news stories are essentially independent from one another. That is, news doesn't move stocks. This is naturally somewhat surprising.

Although they don't link to it, I assume the actual study is here.

The problem is that only the sentationalistic conclusion (i.e., news doesn't move stocks) is being reported. The authors themselves though suggest an alternative explanation:

...most news [stories] are either expected (through rumors and leakage) or deemed insignificant by the market

Given my time spent on the trading floor at a bulge bracket bank this summer, I would say that this explanation is more likely than "news doesn't move stocks." Let's look at one example: The hiring freeze at Merrill Lynch.

The hiring freeze was first reported on the web by DealBreaker on August 13, 10:22am. Then news then "broke" again at DealBook, a New York Times blog, on August 14, 5:29pm. It hit the Reuters wire on August 14, 5:51pm. Now it's not unlikely that the Merrill employee that tipped off DealBreaker called his friends at other banks first. So you're looking at what's probably a 36-hour gap between when traders know about news, and when the news hits the wires. It should come as no surprise that there is no relation between stock movements and news as reported by the major wire services.