Performance Evaluation with Transactions Data: The Stock Selection of Investment Newsletters

Posted: 11 Sep 1998

See all articles by Andrew Metrick

Andrew Metrick

Yale School of Management; National Bureau of Economic Research (NBER); Yale University - Yale Program on Financial Stability

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Abstract

This paper analyzes the equity-portfolio recommendations made by investment newsletters. Overall, there is no significant evidence of superior stock-picking ability for this sample of 153 newsletters. In addition, there is no evidence of abnormal short-run performance persistence ("hot hands"). The comprehensive and bias-free transactions database also allows for insights into the precision of performance evaluation. Using a measure of precision defined in the paper, a transactions-based approach yields a median improvement of ten percent over a corresponding factor model. This compares favorably with the precision gained by adding factors to the CAPM.

JEL Classification: G12, G14

Suggested Citation

Metrick, Andrew, Performance Evaluation with Transactions Data: The Stock Selection of Investment Newsletters. Journal of Finance. Available at SSRN: https://ssrn.com/abstract=119889

Andrew Metrick (Contact Author)

Yale School of Management ( email )

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HOME PAGE: http://faculty.som.yale.edu/andrewmetrick/

National Bureau of Economic Research (NBER) ( email )

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Yale University - Yale Program on Financial Stability

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