39 Pages Posted: 17 May 2009
Date Written: April 12, 2009
We analyze the informational content of more than 1.2 million stock picks provided by more than 60,000 individuals from November 1, 2006 to October 31, 2007 on the CAPS open access website created by the Motley Fool company (www.caps.fool.com). On average, an individual pick in CAPS outperformed the S&P 500 index by 4 percentage points in the twelve months after the pick. We use a four-factor regression framework to estimate the excess returns associated with portfolios that aggregate these picks; a portfolio of the most popular CAPS stocks yielded excess returns of more than 18 percentage points annually relative to the portfolio of the least popular stocks.
Keywords: Economics, Microeconomics, Information Technology
Suggested Citation: Suggested Citation
Avery, Christopher and Chevalier, Judith A. and Zeckhauser, Richard J., The 'CAPS' Prediction System and Stock Market Returns (April 12, 2009). HKS Working Paper No. RWP09-011. Available at SSRN: https://ssrn.com/abstract=1404750 or http://dx.doi.org/10.2139/ssrn.1404750
By Marc Kramer