Are Hated Stocks Good Investments?
29 Pages Posted: 12 Oct 2016
Date Written: september 22, 2016
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: Suggested Citation