Work detail

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.
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