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The "CAPS" Prediction System and Stock Market Returns

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  • Avery, Christopher

    (Harvard University)

  • Chevalier, Judith

    (Yale University)

  • Zeckhauser, Richard

    (Harvard University)

Abstract

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.

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Bibliographic Info

Paper provided by Harvard University, John F. Kennedy School of Government in its series Working Paper Series with number rwp09-011.

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Date of creation: Apr 2009
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Handle: RePEc:ecl:harjfk:rwp09-011

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Cited by:
  1. Godfrey Charles-Cadogan, 2012. "Alpha Representation For Active Portfolio Management and High Frequency Trading In Seemingly Efficient Markets," Papers 1206.2662, arXiv.org.

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