The article continues with some bad news for those investors who pick stocks by reading the general circulation financial news media.

"There's an old adage on Wall Street: "Buy on the rumor, sell on the news." Unfortunately, small investors do not seem to follow this rule. Terrance Odean, a finance professor at the University of California, Berkeley, has found that small individual investors tend to buy stocks when they are mentioned in the media: they buy on the news. The professional and institutional investors are happy to sell to retail investors in such periods.

A recent article in The Financial Analysts Journal by Thomas Arnold, John H. Earl Jr. and David S. North, all finance professors at the University of Richmond, called "Are Cover Stories Effective Contrarian Indicators?" offers an intriguing finding.

The professors look at how a company's stock responds to a cover story in BusinessWeek, Fortune and Forbes. They find that positive stories follow periods of positive performance and negative stories follow periods of negative performance, which admittedly is not too surprising. More interesting, they also find that the appearance of a cover story tends to signal the end of the abnormal performance. Hence, individuals who trade on such "news" are not likely to do well."