The Performance of Investment Newsletters

26 Pages Posted: 17 Oct 2006

See all articles by Jeffrey F. Jaffe

Jeffrey F. Jaffe

University of Pennsylvania - Finance Department

James M. Mahoney

Federal Reserve Bank of New York

Date Written: October 1998

Abstract

This paper analyzes the recommendations of common stocks made by the investment newsletters followed by the Hulbert Financial Digest. We conclude that, taken as a whole, the securities that newsletters recommend do not outperform appropriate benchmarks. Our data provide modest evidence that the future performance of a newsletter is related to its past performance, when performance is measured by raw returns. However, evidence of persistence vanishes when performance is measured by abnormal returns. We find little, if any, evidence of herding, i.e., cross-sectional dependence of recommendations, across newsletters. Newsletters tend to recommend securities that have performed well in the recent past. Finally, newsletters with poor past performance are more likely to go out of business.

Keywords: investment newsletters, stock selection, performance measurement

JEL Classification: G11, G14

Suggested Citation

Jaffe, Jeffrey F. and Mahoney, James M., The Performance of Investment Newsletters (October 1998). FRB of New York Staff Report No. 48. Available at SSRN: https://ssrn.com/abstract=937407 or http://dx.doi.org/10.2139/ssrn.937407

Jeffrey F. Jaffe (Contact Author)

University of Pennsylvania - Finance Department ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States
215-898-5615 (Phone)
215-898-6200 (Fax)

James M. Mahoney

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States
212-720-8910 (Phone)
212-720-1577 (Fax)

Register to save articles to
your library

Register

Paper statistics

Downloads
296
Abstract Views
2,307
rank
100,946
PlumX Metrics