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The Journal of Alternative Investments

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Evidence of Momentum in Newsletter
Recommendations

George Crawford, Alex Krause and Jim Kyung-Soo Liew
The Journal of Alternative Investments Fall 2013, 16 (2) 96-107; DOI: https://doi.org/10.3905/jai.2013.16.2.096
George Crawford
heads the Investment Research Foundation in New York, NY.
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  • For correspondence: gc@investresearch.org
Alex Krause
is a research associate at the Investment Research Foundation in New York, NY.
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  • For correspondence: alexkrause@gmail.com
Jim Kyung-Soo Liew
is an assistant professor in Finance at the Johns Hopkins Carey Business School in Baltimore, MD.
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  • For correspondence: kliew1@jhu.edu
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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.

TOPICS: Security analysis and valuation, analysis of individual factors/risk premia, information providers/credit ratings, performance measurement

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The Journal of Alternative Investments: 16 (2)
The Journal of Alternative Investments
Vol. 16, Issue 2
Fall 2013
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Evidence of Momentum in Newsletter
Recommendations
George Crawford, Alex Krause, Jim Kyung-Soo Liew
The Journal of Alternative Investments Sep 2013, 16 (2) 96-107; DOI: 10.3905/jai.2013.16.2.096

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Evidence of Momentum in Newsletter
Recommendations
George Crawford, Alex Krause, Jim Kyung-Soo Liew
The Journal of Alternative Investments Sep 2013, 16 (2) 96-107; DOI: 10.3905/jai.2013.16.2.096
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  • Article
    • Abstract
    • DATA SET
    • MAIN RESULTS
    • TRANSACTION COSTS AND TURNOVER
    • PROFITABILITY OF NEWSLETTERS ACROSS DESCRIPTIVE VARIABLES
    • CONCLUSION
    • APPENDIX
    • ENDNOTES
    • REFERENCES
  • Info & Metrics
  • PDF (Subscribers Only)
  • PDF (Subscribers Only)

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