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False Bankruptcy Report Shows Risks Of Online News

Publication Date: 
September 09, 2008
Benjamin Pimentel

Professor Joseph A. Grundfest is quoted in a Marketwatch story about the dramatic plunge of United Airlines' stock due to false bankruptcy rumors, and the impact of the Internet on companies and financial markets:

Joseph Grundfest, a professor of law and business at Stanford Law School, said the episode shows that, in today's market environment, high-speed information cuts both ways.

"What you have here is a mistake that caused a very rapid decline in the stock price, but the market also recovered from that decline once the truth was put out within a period of an hour or two or less," he said. "In a world where news travels more slowly, it could take longer to fix the mistake and more people would be affected."


"I can't recall a situation as dramatic," Grundfest, the Stanford law professor, said.