Sharing investment ideas: Role of luck and skill
| Author: | Mgr. Tomáš Turlík |
|---|---|
| Year: | 2021 - summer |
| Leaders: | Mgr. Martin Hronec |
| Consultants: | |
| Work type: | Finance, Financial Markets and Banking Masters |
| Language: | English |
| Pages: | 82 |
| Awards and prizes: | |
| Link: | https://dspace.cuni.cz/handle/20.500.11956/150426 |
| Abstract: | In the environment of a large group of analysts who are willing to share their investment ideas publicly, it is a challenging task to find the ones who have a great skill and whose recommendations generate abnormal returns. We explore one such famous group, Value Investors Club, consisting of 1223 analysts between the years 2000 and 2019. We separate the analysts into multiple groups, each representing their inherent abilities. The commonly used method of single hypothesis testing cannot be used as we test many analysts at once, and the multiple hypothesis testing methods need to be employed. Using these methods, we are able to detect the subgroup of analysts who have abnormal returns from the Fama-French 4 factor portfolio. However, different methods lead to different groups of analysts deemed to be skilled. An overall portfolio consisting of all analysts generates large abnormal returns, which diminish with the increases in the holding period. Furthermore, analyses from analysts estimated to be skilled are used to form portfolios. We find that there are methods that have significantly larger abnormal returns compared to the overall portfolio; however, the methods are not consistent at producing such portfolios. |
