Review of Quantitative Finance and Accounting

, Volume 33, Issue 3, pp 209–232 | Cite as

The value of columnists’ stock recommendations: an event study approach

  • Dan PalmonEmail author
  • Ephraim F. Sudit
  • Ari Yezegel
Original Research


This study examines the value of stock recommendations made by columnists in three leading business magazines; Business Week, Forbes, and Fortune during the period 2000–2003. Empirical results suggest that the anomalous returns documented in prior studies on columnists are sample specific and are not representative of columnist recommendations in general. We also investigate whether columnists’ timing, content and style affect the market reaction to recommendations. We find that recommendations that contain references to management or provide merger & acquisition related rumor trigger significantly greater market reactions. Finally, our long-term performance analysis of columnist recommendations suggests that investors following columnists’ advice during the 2000–2003 period would not have consistently earned abnormal returns controlling for market risk, book-to-market, size, and momentum effects.


Stock recommendations Financial columnists Analysts Event study 

JEL Classification

G11 G12 G14 G24 M41 


  1. Ajinkya BB, Jain PC (1989) The behavior of daily stock market trading volume. J Account Econ 11:331–359. doi: 10.1016/0165-4101(89)90018-9 CrossRefGoogle Scholar
  2. Ashley JW (1962) Stock prices and changes in earnings and dividends: some empirical results. J Polit Econ 70:82–85. doi: 10.1086/258592 CrossRefGoogle Scholar
  3. Ball R, Brown P (1968) An empirical evaluation of accounting income numbers. J Account Res 6:159–178. doi: 10.2307/2490232 CrossRefGoogle Scholar
  4. Barber BM, Loeffler D (1993) The “Dartboard” column: second-hand information and price pressure. J Financ Quant Anal 28:273–284. doi: 10.2307/2331290 CrossRefGoogle Scholar
  5. Barber BM, Lehavy R, Trueman B (2007) Comparing the stock recommendation performance of investment banks and independent research firms. J Financ Econ 85:490–517. doi: 10.1016/j.jfineco.2005.09.004 CrossRefGoogle Scholar
  6. Barker AC (1956) Effective stock splits. Harv Bus Rev 34:101–106Google Scholar
  7. Beneish MD (1991) Stock prices and the dissemination of analysts’ recommendation. J Bus 64:393–416. doi: 10.1086/296543 CrossRefGoogle Scholar
  8. Binder JJ (1985) Measuring the effects of regulation with stock price data. Rand J Econ 16:167–183. doi: 10.2307/2555408 CrossRefGoogle Scholar
  9. Binder JJ (1998) The event study methodology since 1969. Rev Quant Finance Account 11:111–137. doi: 10.1023/A:1008295500105 CrossRefGoogle Scholar
  10. Campbell C, Wasley CE (1996) Measuring abnormal daily trading volume for samples of NYSE/ASE and NASDAQ securities using parametric and nonparametric test statistics. Rev Quant Finance Account 6:309–326. doi: 10.1007/BF00245187 CrossRefGoogle Scholar
  11. Carhart M (1997) On persistence in mutual fund performance. J Finance 52:57–82. doi: 10.2307/2329556 CrossRefGoogle Scholar
  12. Cowan AR (1992) Nonparametric event study tests. Rev Quant Finance Account 2:343–358. doi: 10.1007/BF00939016 CrossRefGoogle Scholar
  13. Cowles A (1933) Can stock market forecasters forecast. Econometrica 1:309–324. doi: 10.2307/1907042 CrossRefGoogle Scholar
  14. Cready WM, Ramanan R (1991) The power of tests employing log-transformed trading volume in detecting abnormal trading. J Account Econ 14:203–215. doi: 10.1016/0165-4101(91)90005-9 CrossRefGoogle Scholar
  15. Dolley J (1933) Characteristics and procedure of common stock split-ups. Harv Bus Rev 11:316–326Google Scholar
  16. Fama EF (1970) Efficient capital markets: a review of theory and empirical work. J Finance 25:383–417. doi: 10.2307/2325486 CrossRefGoogle Scholar
  17. Fama E (1998) Market efficiency, long-term returns, and behavioral finance. J Financ Econ 49:283–306. doi: 10.1016/S0304-405X(98)00026-9 CrossRefGoogle Scholar
  18. Fama E, French K (1993) Common risk factors in the returns on stocks and bonds. J Financ Econ 33:5–56. doi: 10.1016/0304-405X(93)90023-5 CrossRefGoogle Scholar
  19. Fama E, Fisher L, Jensen MC, Roll R (1969) The adjustment of stock prices to new information. Int Econ Rev 10:1–21. doi: 10.2307/2525569 CrossRefGoogle Scholar
  20. Ferreira EJ, Smith SD (2003) “Wall Street Week”: information or entertainment? Financ Anal J 59:45–53. doi: 10.2469/faj.v59.n1.2502 CrossRefGoogle Scholar
  21. Hong H, Kubik JD (2003) Analyzing the analysts: career concerns and biased earnings forecasts. J Finance 58:313–351. doi: 10.1111/1540-6261.00526 CrossRefGoogle Scholar
  22. Ibbotson RG (1975) Price performance of common stock new issues. J Financ Econ 2:235–272. doi: 10.1016/0304-405X(75)90015-X CrossRefGoogle Scholar
  23. Jaffe J (1974) Special information and insider trading. J Bus 47:411–428. doi: 10.1086/295655 CrossRefGoogle Scholar
  24. Larsen GA, Resnick BG (1999) A performance comparison between cross-sectional stochastic dominance and traditional event study methodologies. Rev Quant Finance Account 12:103–112. doi: 10.1023/A:1008376819903 CrossRefGoogle Scholar
  25. Lee JC (1986) Information content of financial columns. J Econ Bus 38:27–39. doi: 10.1016/0148-6195(86)90014-7 CrossRefGoogle Scholar
  26. Liang B (1999) Price pressure: evidence from the “Dartboard” column. J Bus 72:119–134. doi: 10.1086/209604 CrossRefGoogle Scholar
  27. Liu P, Smith SD, Syed AA (1990) Stock price reactions to The Wall Street Journal’s securities recommendations. J Financ Quant Anal 25:399–410CrossRefGoogle Scholar
  28. Lloyd-Davies P, Canes M (1978) Stock prices and the publication of second-hand information. J Bus 51:43–56. doi: 10.1086/295983 CrossRefGoogle Scholar
  29. Mandelker G (1974) Risk and return: the case of merging firms. J Financ Econ 1:303–335. doi: 10.1016/0304-405X(74)90012-9 CrossRefGoogle Scholar
  30. Mathur I, Waheed A (1995) Stock price reactions to securities recommended in Business Week’s “Inside Wall Street”. Financ Rev 30:583–604. doi: 10.1111/j.1540-6288.1995.tb00847.x CrossRefGoogle Scholar
  31. Metcalf GE, Malkiel BG (1994) The Wall Street Journal contests: the experts, the darts, and the efficient market hypothesis. Appl Financ Econ 4:371–374CrossRefGoogle Scholar
  32. Mitchell M, Stafford E (2000) Managerial decisions and long-term stock price performance. J Bus 73:287–320. doi: 10.1086/209645 CrossRefGoogle Scholar
  33. Myers J, Bakay A (1948) Influence of stock split-ups on market prices. Harv Bus Rev 26:251–265Google Scholar
  34. Palmon O, Sun H, Tang AP (1994) The impact of publication of analysts’ recommendations on returns and trading volume. Financ Rev 29:395–417. doi: 10.1111/j.1540-6288.1994.tb00403.x CrossRefGoogle Scholar
  35. Pari RA (1987) Wall Street Week recommendations: yes or no. J Portfol Manage 14:74–76CrossRefGoogle Scholar
  36. Sant R, Zaman MA (1996) Market reaction to Business Week ‘Inside Wall Street’ Column: a self-fulfilling prophecy. J Bank Finance 20:617–643. doi: 10.1016/0378-4266(95)00025-9 CrossRefGoogle Scholar
  37. Schipper K, Thompson R (1983) The Impact of merger-related regulations on the shareholders of acquiring firms. J Account Res 21:184–221. doi: 10.2307/2490943 CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media, LLC 2009

Authors and Affiliations

  1. 1.Department of Accounting, Business Ethics & Information SystemsThe State University of New JerseyNewarkUSA
  2. 2.Department of AccountancyBentley UniversityWalthamUSA

Personalised recommendations