Market Madness? The Case of Mad Money
University of California, San Diego (UCSD) - Rady School of Management
Kellogg School of Management - Department of Finance
Pennsylvania State University - Department of Finance
October 20, 2010
We use the popular television show Mad Money hosted by Jim Cramer to test theories of attention and limits to arbitrage. Stock recommendations on Mad Money constitute attention shocks to a large audience of individual traders. We find that stock recommendations lead to large overnight returns which subsequently reverse over the next few months. The spike-reversal pattern is strongest among small, illiquid stocks that are hard-to-arbitrage. Using daily Nielsen ratings as a direct measure of attention, we find the overnight return is strongest when high income viewership is high. We also find weak price effects among sell recommendations. Taken together, the evidence supports the retail attention hypothesis of Barber and Odean (2008) and illustrates the potential role of media in generating mispricing.
Number of Pages in PDF File: 37
Keywords: market efficiency, Mad Money, Jim Cramer, stock recommendations, CNBC, investor attention
JEL Classification: G14, G11, C15working papers series
Date posted: December 16, 2005 ; Last revised: November 7, 2010
© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo3 in 0.547 seconds