Are Hated Stocks Good Investments?

29 Pages Posted: 12 Oct 2016

See all articles by Jouahn Nam

Jouahn Nam

Pace University - Lubin School of Business

Jun Wang

City University of New York, Baruch College - Zicklin School of Business - Department of Economics and Finance

Cunyu Xing

Southwestern University of Finance and Economics (SWUFE) - School of Business Administration

Ge Zhang

William Paterson University - Cotsakos College of Business

Date Written: september 22, 2016

Abstract

In this paper, we study the performance of hated stocks, those stocks with the average analyst recommendation level of hold or worse. We show that from the beginning of 2009 to the end of 2014, this group of hated stocks in S&P 500 performs better than the other stocks in S&P 500. When we extend the sample to all stocks with at least five analysts following, hated stocks again outperform non-hated stocks in the same time period. Digging deeper into this result, we find that this result is driven by two factors: the impact of the time period of 2009 and 2010, and low priced stocks. If we start the strategy of investing in the group of hated stocks at the beginning of 2011, we do not see a significant outperformance. If we exclude low priced stocks, there is no significant outperformance of the hated stocks starting from 2009.

Keywords: Analyst recommendations, hated stocks, investment performance

JEL Classification: G1

Suggested Citation

Nam, Jouahn and Wang, Jun and Xing, Cunyu and Zhang, Ge, Are Hated Stocks Good Investments? (september 22, 2016). Available at SSRN: https://ssrn.com/abstract=2850575 or http://dx.doi.org/10.2139/ssrn.2850575

Jouahn Nam

Pace University - Lubin School of Business ( email )

1 Pace Plaza
New York, NY 10038-1502
United States
212-346-1818 (Phone)
212-346-1573 (Fax)

Jun Wang

City University of New York, Baruch College - Zicklin School of Business - Department of Economics and Finance ( email )

17 Lexington Avenue
New York, NY 10010
United States

Cunyu Xing

Southwestern University of Finance and Economics (SWUFE) - School of Business Administration ( email )

No.55 Guanghuacun Street
Chengdu, 610074
China

Ge Zhang (Contact Author)

William Paterson University - Cotsakos College of Business ( email )

1600 Valley Road
Wayne, NJ 07470
United States

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