Stock Analysts Efficiency in a Tournament Structure: The Impact of Analysts Picking a Winner and a Loser

Abstract

A financial analyst who can give accurate return predictions is highly valued. This study uses a unique data set comparing CNBC’s Fast Money’s ‘March Madness’ stock picks as a proxy for analysts’ stock return predictions. With this data, set up as a tournament, the analysts pick both a winner and a loser. With the tournament structure, I find that these analysts have no superior ability to pick the winning stock in terms of frequency. However, I do find that taking a long/short portfolio of their picks yields an abnormal return.

Keywords: Market Efficiency, Stock Analysts, CNBC’s Fast Money, Anchoring

JEL Classification: G12, G14, G15