Retirement Income Journal
The information forum of the decumulation industry.

Following the collective stock recommendations made by Motley Fool website readers and posted on the website in a certain way could have yielded substantial returns, according to a paper published this year by the National Bureau of Economic Research.

“A strategy of shorting stocks with a disproportionate number of negative picks on the site and buying stocks with a disproportionate number of positive picks produces a return of over 9 percent per annum over the sample period,” the paper said. 

“These results are mostly driven by the fact that negative picks on the site strongly predict future stock price declines, while positive picks on the site produce returns that are statistically indistinguishable from the market.”

Written by Judith A. Chevalier of Yale and Richard J. Zeckhauser and Christopher Avery of Harvard, the paper assesses the predictive power of approximately 2.5 million stock predictions submitted by individual users to the ‘CAPS’ website run by the Motley Fool company.