A Comparison of Portfolio Performances of the Random and Strategic Stock Selection Strategies: The Hampton Roads Stock Picking Contest

The International Journal of Business and Finance Research, Vol. 1, No. 1, pp. 38-47, 2007

10 Pages Posted: 19 Feb 2010

See all articles by Sid Howard Credle

Sid Howard Credle

Hampton University

Sharad Maheshwari

Hampton University

Edward Pyatt

Hampton University

Date Written: 2007

Abstract

In this paper the performance of the random and the strategic stock selection approaches are compared and tested to determine which results in the greater level of returns to a portfolio of stocks of Virginia based companies. The analysis is conducted via a stock picking contest developed by a local daily newspaper in the Hampton Roads area and hosted by a local university business school. The contest included 1,225 entries, in which contestants chose five stocks from Virginia-based companies. The portfolio return performance of contestants was observed over a 12 week period and the contestant receiving the greatest hypothetical returns over the contest period received a $1,000 US savings bond.

The stocks selected by contestants were classified into two aggregated portfolios, indicating whether a random, or a technical/strategic method, was used to pick stock portfolios. A comparison of the two aggregated portfolios indicated that the technical/ strategic selection group out-performed the random walk selection group. In 10 of 12 weeks of the contest the researchers observed a statistically significant difference in the returns of these portfolios. It was also observed that the strategic group out-performed the selected population of Virginia based companies. None of the aggregated average returns from the random or the strategic selection group portfolios out-performed the Standard & Poors 500 Average during the contest.

Suggested Citation

Credle, Sid Howard and Maheshwari, Sharad and Pyatt, Edward, A Comparison of Portfolio Performances of the Random and Strategic Stock Selection Strategies: The Hampton Roads Stock Picking Contest (2007). The International Journal of Business and Finance Research, Vol. 1, No. 1, pp. 38-47, 2007, Available at SSRN: https://ssrn.com/abstract=1543359

Sid Howard Credle (Contact Author)

Hampton University ( email )

Hampton, VA 23668
United States

Sharad Maheshwari

Hampton University ( email )

Hampton, VA 23668
United States

Edward Pyatt

Hampton University ( email )

Hampton, VA 23668
United States

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