According to the Efficient Market Hypothesis (EMH), prices in an efficient market should already reflect all public information. Because of media outlets and modern technology (i.e., streaming news, up-to-date online reporting, social media), people can share and receive information faster than before, which ensures prices reflect a company’s position at all times. An example is receiving breaking news through Reddit on Tesla’s highly anticipated Cybertrucks not performing to its ability and selling less than expected, indicating that Tesla’s share price will decline.
Technology has improved market efficiency through algorithmic trading. This kind of trading involves computer programs that purchase and sell stocks in seconds based on public information. As a result, it is more difficult for a human to beat the market since these automated programs already help close this gap, ensuring that prices are meant to be where they are. On the other hand, too much algorithmic trading can cause “flash crashes.” These crashes occur when these computer programs overreact to information about a stock and, as a result, significantly drop the price of a stock for a short time. Additionally, since information is sent and received rapidly across social networks, fake information can also be transmitted, which artificially affects stock prices.
Referring back to previous modules, Robinhood’s online trading platform is designed to display which stocks are currently trending. The user experience is similar to that of a gaming platform, encouraging users to act irrationally in decision-making. In conclusion, while technology has its benefits of introducing tools and networks to quickly and efficiently execute trades, it also carries the risk of program failures and spreading misinformation.
Works Cited
“Algorithmic Trading Market Research Report 2025-2030.” Yahoo Finance, 2 Apr. 2025, finance.yahoo.com/news/algorithmic-trading-market-research-report-080900339.html.
Kenton, Will. “Flash Crash: Definition, Causes, History.” Investopedia, 21 May 2024, www.investopedia.com/terms/f/flash-crash.asp.Investopedia
Seth, Shobhit. “Basics of Algorithmic Trading: Concepts and Examples.” Investopedia, 14 Dec. 2023, www.investopedia.com/articles/active-trading/101014/basics-algorithmic-trading-concepts-and-examples.asp.
Written by Mikael La Ferla
Mikael La Ferla 