Evaluating the performance of the Motley Fool’s Stock Advisor™

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Since March 2002, The Motley Fool’s founders, David Gardner and Tom Gardner, have published monthly stock recommendations under Motley Fool’s premium Stock Advisor service. In this paper, the authors investigate whether analysts’ recommendations can add value for investors by examining the performance of portfolios constructed based on Motley Fool’s recommendations. They evaluate the announcement effect on share price corresponding to the publication of stock recommendations. Additionally, the researchers examine holding period returns for a portfolio imitating the actions of Stock Advisor. They find portfolios composed of recommendations through Stock Advisor added value initially upon recommendation and across extended holding periods. Additionally, the authors find that the Stock Advisor sample outperforms other sample portfolios on a risk-adjusted basis and over several subperiods. The findings contribute to the literature on the usefulness of analysts’ recommendations in adding value to investors’ portfolios.

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    • Table 1. Sample description
    • Table 2. Descriptive statistics for the Stock Advisor sample and matched sample
    • Table 3. Abnormal returns (ARs) and cumulative abnormal returns (CARs) around the event date for the Stock Advisor sample and subsamples
    • Table 4. Raw and risk-adjusted returns of the Stock Advisor sample, matched sample and subsamples compared to the S&P 500
    • Table 5. Regression results for Fama-French 3- and 4-factor model for the Stock Advisor sample and subsamples
    • Table 6. Buy and hold abnormal returns (BHARs) for the Stock Advisor sample