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The investment value of analysts’ recommendations: evidence from the dartboard contest

Steven R. Ferraro (Associate Professor of Finance, Department of Accounting, Finance and Law, Pepperdine University, Culver City, CA, 90230)
Darrol J. Stanley (Professor of Finance and Accounting, Department of Accounting, Finance, and Law, Pepperdine University, Culver City, CA, 90230)

Managerial Finance

ISSN: 0307-4358

Article publication date: 1 June 2000

Abstract

Briefly reviews previous research on the value of investment advisors’ recommendations and presents a study comparing portfolio returns from analysts’ recommendations in the Wall Street Journal’s “Dartboard” contest 1990‐1996, four randomly selected shares and the Dow Jones Industrial Average. Finds the analysts’ portfolio has the highest average returns and standard deviation; and that although some individual analysts have excellent scores in the contest, this is inversely related to the number of times they participate. Suggests that they do not significantly outperform other portfolios, but that contest winners’ tips have significant effects on the market, especially for non‐listed shares. Assesses the implications of the results for the efficient market hypothesis and the share prices of firms with higher asymmetric information.

Keywords

Citation

Ferraro, S.R. and Stanley, D.J. (2000), "The investment value of analysts’ recommendations: evidence from the dartboard contest", Managerial Finance, Vol. 26 No. 6, pp. 36-48. https://doi.org/10.1108/03074350010766738

Publisher

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MCB UP Ltd

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