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Stock‐Price Effects of Internet Buy‐Sell Recommendations: The Motley Fool Case
Author(s) -
Hirschey Mark,
Richardson Ver J.,
Scholz Susan
Publication year - 2000
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/j.1540-6288.2000.tb01418.x
Subject(s) - motley , stock (firearms) , business , the internet , clonus , advertising , economics , monetary economics , mechanical engineering , philosophy , linguistics , neuroscience , world wide web , computer science , engineering , epilepsy , biology
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.