The Performance and Impact of Stock Picks Mentioned on 'Mad Money'

Abstract

We analyze both the market reaction and long-term returns of stock picks mentioned on the CNBC program Mad Money, hosted by former hedge fund manager Jim Cramer. We find that Cramer's stock-picking style is consistent with a positive-feedback trading strategy, favoring stocks which have outperformed over an interval prior to the pick date. Subsequent to a pick, Cramer's immediate effect on a stock appears inversely proportional to the corresponding firm's market capitalization. The returns over a six-month horizon provide some evidence in favor of Cramer's stock-picking ability. In particular, his recommendations on small-cap stocks accurately predict the long-run trends.

Keywords: mad money, CNBC, Jim Cramer

JEL Classification: G14