Stock‐Price Effects of Internet Buy‐Sell Recommendations: The Motley Fool Case

The Motley Fool has attracted significant notoriety for stock market buy-sell advice on the Internet. Across five different investment portfolios, Motley Fool buy recommendations appear to generate an average 1.62% rise in stock prices on the announcement day (0), and 2.40% returns over the announcement period (-1, +1). Sell recommendations seem to cause a -1.49% announcement day return, and a -3.33% announcement period return. Small cap growth stock buy recommendations for The Motley Fool's flagship Rule Breaker Portfolio are associated with returns of 3.66% on the announcement day, and a 6.15% return over the announcement period. These findings suggest herd-like behavior among Internet investors, and that such announcements are more newsworthy than second-hand buy-sell recommendations published in traditional print and electronic media. Copyright 2000 by MIT Press.