Jim Cramer's ‘Mad Money’ Charitable Trust Performance and Factor Attribution

Posted: 15 May 2016

See all articles by Jonathan Hartley

Jonathan Hartley

Stanford University

Matthew Olson

University of Pennsylvania, The Wharton School, Students

Date Written: May 12, 2016

Abstract

This study analyzes the complete historical performance of Jim Cramer’s Action Alerts PLUS portfolio from 2001 to 2016 which includes many of the stock recommendations made on Cramer’s TV show “Mad Money”. Both since inception of the portfolio and since the start of “Mad Money” in 2005 (when it was converted into a charitable trust), Cramer’s portfolio has underperformed the S&P 500 total return index and a basket of S&P 500 stocks that does not reinvest dividends (both on an overall returns basis and in Sharpe ratio). These findings contrast with previous studies which analyzed Cramer’s outperformance in short windows before the 2008 financial crisis. Using factor analysis, we find that Cramer’s portfolio returns are primarily driven by underlevered exposure to market returns and in some specifications tilting toward small cap stocks, growth stocks and stocks with low quality of earnings. These results have broad implications for market efficiency, the usefulness of single name stock recommendations made on television, financial education, and the implementation of academic factors thematic in Cramer’s portfolio.

Keywords: Asset Pricing, Market Efficiency, Leverage, Size, Value, Momentum, Quality

Suggested Citation

Hartley, Jonathan and Olson, Matthew, Jim Cramer's ‘Mad Money’ Charitable Trust Performance and Factor Attribution (May 12, 2016). https://doi.org/10.3905/jor.2018.1.039 , Available at SSRN: https://ssrn.com/abstract=2778724 or http://dx.doi.org/10.2139/ssrn.2778724

Jonathan Hartley (Contact Author)

Stanford University ( email )

Stanford, CA
United States

HOME PAGE: http://www.jonathanhartley.net

Matthew Olson

University of Pennsylvania, The Wharton School, Students ( email )

3641 Locust Walk
Philadelphia, PA 19104
United States

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