Financial Markets and Portfolio Management

, Volume 27, Issue 2, pp 149–186 | Cite as

Do individual investors’ stock recommendations in online communities contain investment value?



This paper investigates the investment value of individual investors’ stock recommendations within online communities. We find that aggregated recommendations contain no explicit investment value and that following these recommendations may have a negative impact on investment performance. Our results suggest that recommendations are mostly based on simple heuristics and concentrate on a small number of stocks. When restricting the set of recommendations to those made by the most experienced or successful recommenders, results marginally improve but still preclude profitable investment strategies. Experienced and successful recommenders seem more likely to avoid the most expensive pitfalls rather than actually exhibit superior investment performance.


Individual investors Online communities Stock recommendations Investment value Event study Abnormal returns 

JEL Classification

D12 G11 G14 



We are grateful to an anonymous referee for valuable comments on our drafts and to Markus Schmid, the editor. We thank Cetin-Behzet Cengiz, Christian Wegener, Sarah Schiffer, and Philipp von Thunen for their comments on earlier versions of this manuscript.


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Copyright information

© Swiss Society for Financial Market Research 2013

Authors and Affiliations

  1. 1.Chair of Decision Theory and Financial ServicesRWTH Aachen UniversityAachenGermany

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