Evidence of Momentum in Newsletter
Recommendations

Abstract

The authors study a database of investment newsletter performance since 1980, and find that the top newsletters consistently outperform the bottom newsletters when a one- to six-month look-back period is employed. They find that dynamically allocating to “winning” newsletter recommendations and shorting “losing” newsletter recommendations is both economically and statistically significant. The long/short quintile sorted portfolios employing prior monthly returns from newsletters, generating gross-of-cost annualized returns of 11.1% with t-statistics of 2.94. Notably, this positive performance comes packaged with a negative and statistically significant CAPM’s beta the “holy-grail” investment strategy. Moreover, this relationship of negative CAPM’s beta coupled with positive Jensen’s Alpha has persisted over many years. These results extend the growing body of momentum literature to include newsletter investing.