Pity the individual investor. He or she must face the daily torrent of investment data and advice from any number of sources. There are the more traditional sources of information such as financial newspapers, magazines, newsletters. There is the more sophisticated, and costly option of engaging a financial advisor who may have CFP, CFA, CPA, CLU, PhD or any other combination of professional designations appended to their name.
There are endless financial websites brimming with data and financial blogs providing opinion on every tradable security known to man. There is research presented in academic journals testing various investment strategies. And there is television, a super-convenient source of visiocentric information available in 98% of all U.S. Households.
One particular television program, targeting the individual investor is Mad Money, hosted by Jim Cramer. Mad Money is claimed to be the most-watched show on CNBC, with an audience in excess of 380,000 potential investors each weeknight. The objective of this research is to examine the nature and impact of stock buy and sell recommendations proffered by Cramer on his program. We examine the nature of the market impact of recommendations revealed on the show and explore the performance and style characteristics of a Cramer portfolio.
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. The results also contribute to the literature on the impact of analysts recommendations and second-hand information effects on stock prices.
