RT Journal Article
SR Electronic
T1 How Mad Is Mad Money? Jim Cramer as a
Stock Picker and Portfolio Manager
JF The Journal of Investing
FD Institutional Investor Journals
SP 27
OP 39
DO 10.3905/joi.2012.21.2.027
VO 21
IS 2
A1 Paul Bolster
A1 Emery Trahan
A1 Anand Venkateswaran
YR 2012
UL https://pm-research.com/content/21/2/27.abstract
AB This article examines a widely popular and controversial source of investment advice: buy and sell recommendations made by Jim Cramer on his popular nightly Mad Money show on CNBC. The results show that Cramer’s recommendations impact share prices of the companies that he mentions. The effects are short-lived and reverse for buy recommendations, although they persist for sell recommendations. Returns for a portfolio of Cramer recommendations are significantly different from zero for some subperiods. Factor analysis suggests that these returns are driven by beta exposure, smaller stocks, growth-oriented stocks, and momentum effects. Overall performance is average after adjusting for factor exposures. Further analysis indicates a significant cluster of new or updated analysts’ ratings of stocks just before and just after a Cramer recommendation. The results provide insights into the performance of a popular but controversial market pundit and should be of interest to followers and detractors seeking to develop an active, or alpha-generating, investment strategy.TOPICS: Factor-based models, portfolio construction, equity portfolio management