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How well do financial experts perform? A review of empirical research on performance of analysts, day-traders, forecasters, fund managers, investors, and stockbrokers

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Author Info
Andersson, Patric () (Center for economic psychology)
Abstract

In this manuscript, empirical research on performance of various types of financial experts is reviewed. Financial experts are used as the umbrella term for financial analysts, stockbrokers, money managers, investors, and day-traders etc. The goal of the review is to find out about the abilities of financial experts to produce accurate forecasts, to issue profitable stock recommendations, as well as to make successful investments and trades. On the whole, the reviewed studies show discouraging tendencies of the alleged excellence of financial experts.

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Paper provided by Stockholm School of Economics in its series Working Paper Series in Business Administration with number 2004:9.

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Length: 29 pages
Date of creation: 23 Aug 2004
Date of revision:
Handle: RePEc:hhb:hastba:2004_009

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Related research
Keywords: Behavioral finance; Expert judgment; Financial psychology; Forecasting; Investment; Trading; Performance;

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  1. David Hirshleifer & Tyler Shumway, 2003. "Good Day Sunshine: Stock Returns and the Weather," Journal of Finance, American Finance Association, vol. 58(3), pages 1009-1032, 06. [Downloadable!] (restricted)
    Other versions:
  2. Harris, Jeffrey H. & Schultz, Paul H., 1998. "The trading profits of SOES bandits1," Journal of Financial Economics, Elsevier, vol. 50(1), pages 39-62, October. [Downloadable!] (restricted)
  3. Leuthold, Raymond M & Garcia, Philip & Lu, Richard, 1994. "The Returns and Forecasting Ability of Large Traders in the Frozen Pork Bellies Futures Market," Journal of Business, University of Chicago Press, vol. 67(3), pages 459-73, July. [Downloadable!] (restricted)
  4. Shanteau, James, 1992. "Competence in experts: The role of task characteristics," Organizational Behavior and Human Decision Processes, Elsevier, vol. 53(2), pages 252-266, November. [Downloadable!] (restricted)
  5. Slovic, Paul & Fleissner, Dan & Bauman, W Scott, 1972. "Analyzing the Use of Information in Investment Decision Making: A Methodological Proposal," Journal of Business, University of Chicago Press, vol. 45(2), pages 283-301, April. [Downloadable!] (restricted)
  6. Harrison Hong & Jeffrey D. Kubik, 2003. "Analyzing the Analysts: Career Concerns and Biased Earnings Forecasts," Journal of Finance, American Finance Association, vol. 58(1), pages 313-351, 02. [Downloadable!] (restricted)
  7. Hartzmark, Michael L, 1991. "Luck versus Forecast Ability: Determinants of Trader Performance in Futures Markets," Journal of Business, University of Chicago Press, vol. 64(1), pages 49-74, January. [Downloadable!] (restricted)
  8. Andrew Metrick, 1999. "Performance Evaluation with Transactions Data: The Stock Selection of Investment Newsletters," Journal of Finance, American Finance Association, vol. 54(5), pages 1743-1775, October. [Downloadable!] (restricted)
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  9. Burton G. Malkiel, 2003. "The Efficient Market Hypothesis and Its Critics," Journal of Economic Perspectives, American Economic Association, vol. 17(1), pages 59-82, Winter. [Downloadable!] (restricted)
  10. Andersson, Patric & Hellman, Niclas, 2004. "The impact of pro forma profits on analyst forecasts: Some experimental evidence," Working Paper Series in Business Administration 2004:5, Stockholm School of Economics.
  11. Stickel, Scott E, 1992. " Reputation and Performance among Security Analysts," Journal of Finance, American Finance Association, vol. 47(5), pages 1811-36, December. [Downloadable!] (restricted)
  12. Womack, Kent L, 1996. " Do Brokerage Analysts' Recommendations Have Investment Value?," Journal of Finance, American Finance Association, vol. 51(1), pages 137-67, March. [Downloadable!] (restricted)
  13. Jaffe, Jeffrey F. & Mahoney, James M., 1999. "The performance of investment newsletters," Journal of Financial Economics, Elsevier, vol. 53(2), pages 289-307, August. [Downloadable!] (restricted)
  14. Sundali, James A. & Atkins, Allen B., 1994. "Expertise in Investment Analysis: Fact or Fiction," Organizational Behavior and Human Decision Processes, Elsevier, vol. 59(2), pages 223-241, August. [Downloadable!] (restricted)
  15. Robert J. Shiller, 2003. "From Efficient Markets Theory to Behavioral Finance," Journal of Economic Perspectives, American Economic Association, vol. 17(1), pages 83-104, Winter. [Downloadable!] (restricted)
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  16. De Bondt, Werner F M & Thaler, Richard H, 1990. "Do Security Analysts Overreact?," American Economic Review, American Economic Association, vol. 80(2), pages 52-57, May. [Downloadable!] (restricted)
  17. Shanteau, James & Weiss, David J. & Thomas, Rickey P. & Pounds, Julia C., 2002. "Performance-based assessment of expertise: How to decide if someone is an expert or not," European Journal of Operational Research, Elsevier, vol. 136(2), pages 253-263, January. [Downloadable!] (restricted)
  18. JOSHUA D. COVAL & David Hirshleifer & TYLER G. SHUMWAY, 2004. "Can Individual Investors Beat the Market?," Finance 0412005, EconWPA. [Downloadable!]
  19. Jacob, John & Lys, Thomas Z. & Neale, Margaret A., 1999. "Expertise in forecasting performance of security analysts," Journal of Accounting and Economics, Elsevier, vol. 28(1), pages 51-82, November. [Downloadable!] (restricted)
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