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Stock-Price Effects of Internet Buy-Sell Recommendations: The Motley Fool Case

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  • Hirschey, Mark
  • Richardson, Vernon J
  • Scholz, Susan

Abstract

The Motley Fool has attracted significant notoriety for stock market buy-sell advice on the Internet. Across five different investment portfolios, Motley Fool buy recommendations appear to generate an average 1.62% rise in stock prices on the announcement day (0), and 2.40% returns over the announcement period (-1, +1). Sell recommendations seem to cause a -1.49% announcement day return, and a -3.33% announcement period return. Small cap growth stock buy recommendations for The Motley Fool's flagship Rule Breaker Portfolio are associated with returns of 3.66% on the announcement day, and a 6.15% return over the announcement period. These findings suggest herd-like behavior among Internet investors, and that such announcements are more newsworthy than second-hand buy-sell recommendations published in traditional print and electronic media. Copyright 2000 by MIT Press.

Suggested Citation

  • Hirschey, Mark & Richardson, Vernon J & Scholz, Susan, 2000. "Stock-Price Effects of Internet Buy-Sell Recommendations: The Motley Fool Case," The Financial Review, Eastern Finance Association, vol. 35(2), pages 147-174, May.
    • Handle: RePEc:bla:finrev:v:35:y:2000:i:2:p:147-74
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    Cited by:

    1. Ryan G. Chacon & Thibaut G. Morillon & Ruixiang Wang, 2023. "Will the reddit rebellion take you to the moon? Evidence from WallStreetBets," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 37(1), pages 1-25, March.
    2. Leung, Henry & Ton, Thai, 2015. "The impact of internet stock message boards on cross-sectional returns of small-capitalization stocks," Journal of Banking & Finance, Elsevier, vol. 55(C), pages 37-55.
    3. Domonkos F. Vamossy & Rolf Skog, 2021. "EmTract: Extracting Emotions from Social Media," Papers 2112.03868, arXiv.org, revised Jun 2023.
    4. Domonkos F. Vamossy, 2024. "Social Media Emotions and Market Behavior," Papers 2404.03792, arXiv.org.
    5. Detlef Seese & Christof Weinhardt & Frank Schlottmann (ed.), 2008. "Handbook on Information Technology in Finance," International Handbooks on Information Systems, Springer, number 978-3-540-49487-4, November.

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