Performance Evaluation with Transactions Data: The Stock Selection of Investment Newsletters

Andrew Metrick

Journal of Finance, 1999, vol. 54, issue 5, 1743-1775

Abstract: This paper analyzes the equity‐portfolio recommendations made by investment newsletters. Overall, there is no significant evidence of superior stock‐picking ability for this sample of 153 newsletters. Moreover, there is no evidence of abnormal short‐run performance persistence (“hot hands”). The comprehensive and bias‐free transactions database also allows for insights into the precision of performance evaluation. Using a measure of precision defined in the paper, a transactions‐based approach yields a median improvement of 10 percent over a corresponding factor model. This compares favorably with the precision gained by adding factors to the CAPM.

Date: 1999
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https://doi.org/10.1111/0022-1082.00165

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Working Paper: Performance Evaluation with Transactions Data: The Stock Selection of Investment Newsletters (1998)
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