DEFINITION of ‘Headline Risk’
The possibility that a news story will adversely affect a stock’s price. Headline risk can also impact the performance of the stock market as a whole.
BREAKING DOWN ‘Headline Risk’
For example, in the aftermath of the housing crisis, mortgage lenders such as Bank of America, JP Morgan Chase and CitiGroup faced significant headline risk.
One way a company can mitigate headline risk is through effective public relations campaigns. Successful public relations efforts can promote positive images of a company that can help counteract any negative stories as well as provide swift damage control if such a story is released. Individual investors can counteract headline risk by using a buy-and-hold investing strategy that ignores the short-term changes in the market that are triggered by headlines.