Ten Years of Misleading Information - Investment Advice in Printed Media

Abstract

This paper analyzes the returns to stock recommendations published in eleven well-known Swedish morning newspapers, tabloids, business newspapers and magazines during the period 1995-2004 prior to, at the time of, and for up to a year after the recommendation was published. The sample size of 5,190 buy recommendations and 851 sell recommendations by far makes it the most comprehensive study of stock recommendations in the printed media to this date. Buy recommendations are found to insignificantly underperforming the risk-replicating portfolio by almost two percentage points for the year after they were published. Buy's of small-firm stocks outperform the risk-replicating portfolio whereas medium- and large-sized firms underperforms. Unique buy recommendations perform better than repeated ones. Sell-recommended stocks underperform stocks with the same riskiness. However, readers could not profit from them because they actually increase in value.