Stock-Price Effects of Internet Buy-Sell Recommendations: The Motley Fool Case

Mark Hirschey, Vernon J Richardson and Susan Scholz

The Financial Review, 2000, vol. 35, issue 2, 147-74

Abstract: The Motley Fool has attracted significant notoriety for stock market buy-sell advice on the Internet. Across five different investment portfolios, Motley Fool buy recommendations appear to generate an average 1.62% rise in stock prices on the announcement day (0), and 2.40% returns over the announcement period (-1, +1). Sell recommendations seem to cause a -1.49% announcement day return, and a -3.33% announcement period return. Small cap growth stock buy recommendations for The Motley Fool's flagship Rule Breaker Portfolio are associated with returns of 3.66% on the announcement day, and a 6.15% return over the announcement period. These findings suggest herd-like behavior among Internet investors, and that such announcements are more newsworthy than second-hand buy-sell recommendations published in traditional print and electronic media. Copyright 2000 by MIT Press.

Date: 2000
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