Mad Money Research Articles

Content and Context: Identifying the Impact of Qualitative Information on Consumer Choice

Managers and researchers alike suspect that the vast amounts of qualitative information found in blogs, product reviews, real estate listings, news stories, analyst reports and experts’ advice influence consumer behavior. But, do these kinds of qualitative information impact or rather reflect consumer choices? We argue that message content and consumer choice are endogenous, and that non-random selection and the conflation of awareness and persuasion complicate causal estimation of the impact of message content on economic decisions and outcomes. Using data on the transcribed content of 2,397 stock recommendations provided by Jim Cramer on his CNBC show Mad Money from 2005 to 2008, combined with data on Internet search volume, the content of prior news, and prior stock price and trading volume data, we show that selection bias in the stocks Cramer chooses to recommend and prior product awareness on the part of his audience create measurable upward bias in estimates of the impact of Cramer’s advice on stock prices. Using Latent Dirichlet Allocation (LDA) to characterize the topical content of Cramer’s speech and the content of prior news, we show that he is less persuasive when he supports his recommendations with arguments that have themselves been recently mentioned in the news. We argue that the classic sales skill of “knowing what a customer needs to hear” can significantly enhance the influence of qualitative information precisely because what the consumer already knows affects how they evaluate messages. The tools and techniques we develop can be put to practical use in a variety of settings where marketers can present subjects with different messages depending on what they already know.

“Mad Money” madness: Jim Cramer's image restoration effort

The following is an evaluation of “Mad Money” host Jim Cramer's image restoration attempts during his March 2009 week-long media battle with Jon Stewart, host of “The Daily Show.” Using Benoit's (1995) image restoration theory as a conceptual framework, it is apparent that Cramer failed in restoring his reputation because he frequently coupled incongruent strategies and was unable to grasp the dynamic nature of communicative image restoration.

Do Jim Cramer’s Mad Money Recommendations Have the Same Impact in a Bear Market as in a Bull Market?

Many empirical studies of investment advisory services find statistically significant abnormal returns at the time of their public availability. Jim Cramer’s Mad Money recommendations are one example of investment advice that has been studied in the recent past. This study is an extension of Neumann and Kenny’s (2007) work published earlier concerning Jim Cramer’s Mad Money stock picks. Earlier Neumann and Kenny (2007) found market reactions to Jim Cramer’s stock recommendations using 2005 data. In this study, Jim Cramer’s recommendations are examined again but utilizing more recent data occurring during a bear market rather than the previous examinations during bull markets. Specifically, this research questions whether viewers continue to follow Jim Cramer’s Mad Money stock suggestions in a bear market and whether the mentioned stocks still experience significant abnormal returns during part of the bear market of 2008. The analysis of stock returns and trading volume reveals statistical evidence of response to his buy recommendations.

The performance and impact of stock picks mentioned on ‘Mad Money’

We analyse both the market reaction and the long-term returns of stock picks mentioned on the Consumer News and Business Channel (CNBC) programme ‘Mad Money’, hosted by former hedge fund manager Jim Cramer. We find that Cramer's stock-picking style is consistent with a positive-feedback trading strategy, favouring stocks which have outperformed over an interval prior to the pick date. Subsequent to a pick, Cramer's immediate effect on a stock appears inversely proportional to the corresponding firm's market capitalization. The returns over a 6-month horizon provide some evidence in favour of Cramer's stock-picking ability. In particular, his recommendations on small-cap stocks accurately predict the long-run trends.

Market Madness? The Case of Mad Money

We use the popular television show Mad Money hosted by Jim Cramer to test theories of attention and limits to arbitrage. Stock recommendations on Mad Money constitute attention shocks to a large audience of individual traders. We find that stock recommendations lead to large overnight returns which subsequently reverse over the next few months. The spike-reversal pattern is strongest among small, illiquid stocks that are hard-to-arbitrage. Using daily Nielsen ratings as a direct measure of attention, we find the overnight return is strongest when high income viewership is high. We also find weak price effects among sell recommendations. Taken together, the evidence supports the retail attention hypothesis of Barber and Odean (2008) and illustrates the potential role of media in generating mispricing.

Impact of Mad Money Stock Recommendations: Merging Financial and Marketing Perspectives

This article relies on advertising and persuasive communications theories to uncover persistent variations in investor response to television stock recommendations targeting naive investors. The authors use an event study methodology to determine the size of the next-day abnormal market reaction to recommendations on Mad Money with Jim Cramer.Although viewers are actively looking for recommendations, the results show that any individual recommendation is still subject to many of the same communication challenges as traditional advertisements. A regression analysis finds that traditional advertising variables, such as message length, recency–primacy effects, information clutter, and source credibility, influence the size of the market reaction to a “buy” recommendation. The authors discuss implications for marketers, managers of public companies, and those interested in public policy aspects related to televised stock recommendations.

Mad Money stock recommendations: market reaction and performance

We examine the stock recommendations of Jim Cramer televised on CNBC’s Mad Money, and document significant market reactions (i.e., announcement returns and volume) to Cramer’s recommendations, particularly for small capitalization stocks. The following findings indicate that the announcement returns are primarily due to price pressure from uninformed trading as opposed to the recommendations providing new value related information: announcement returns reverse following buy recommendations; bid-ask spreads temporarily decline; and there is no evidence of positive longer-term abnormal returns. One implication, when considered in combination with other works, is that investors should be cautious in following stock recommendations announced in the mass-media.

Does Mad Money make the market go mad?

Empirical studies of numerous popular investment advisory services find statistically significant abnormal returns at the time of their broadcast or published investment recommendations. Our analysis of returns and trading volume around stock recommendations aired on charismatic host Jim Cramer's Mad Money program reveals statistical evidence of response to both his buy and sell opinions, with most of the full-day return following an on-air buy recommendation captured by that day's opening price. Trading strategy analysis suggests that individuals with limited funds should be wary of short-term trading to exploit the show's suggestions, while professional investors may be able to exploit buy picks with a contra strategy.

The Performance and Impact of Stock Picks Mentioned on 'Mad Money'

We analyze both the market reaction and long-term returns of stock picks mentioned on the CNBC program Mad Money, hosted by former hedge fund manager Jim Cramer. We find that Cramer's stock-picking style is consistent with a positive-feedback trading strategy, favoring stocks which have outperformed over an interval prior to the pick date. Subsequent to a pick, Cramer's immediate effect on a stock appears inversely proportional to the corresponding firm's market capitalization. The returns over a six-month horizon provide some evidence in favor of Cramer's stock-picking ability. In particular, his recommendations on small-cap stocks accurately predict the long-run trends.

Market Reactions to Jim Cramer's Mad Money Lightning Round

Numerous empirical studies examine investment advisory services and find statistically significant abnormal returns around publication or broadcast of investment recommendations. From Jim Cramer's Mad Money broadcast, the opportunity is presented to examine another source of investment recommendations through his Lightning Round segment. This research finds companies which were recommended buys by Mr. Cramer during the Lightning Round consistently have abnormal stock movement before and after the on-air mention, however investors' reactions to the recommendations do not create an exploitable trading strategy. Stocks with bearish recommendations are found to experience even less reaction.

Program director's column

Jim Cramer's Mad Money program on CNBC points out rules to invest by which are prudent when managing and investing in the stock market. Creating a portfolio of investments is not necessarily an easy thing. Even more long term, being a manager of a research portfolio means knowing how and where to make investments, having a competent set of reviewers to assess those investments, determining what investments are likely to be of value to the community, determining the next generation leading computer scientists and achieving the best reward for the community by a modest investment of $9M to 10Million dollars (which is what I have to work with). NSF invests in people, ideas, and tools proposed by our community. A Program Director is in essence a technical manager of a portfolio of investments; it is hard to gear the "payoff" to the community when one is a good NSF portfolio manager because there is no day-to-day stock price to determine how well the portfolio is doing. In fact, while I have been at NSF we have about the same amount of investment funds for the Parallel and Distributed Operating Systems (PDOS) community. But yes, there is a yearly report and there are nuggets. The yearly report provides a nice indication of research accomplishments, impact, and publication output; let's focus on nuggets however.

Market Madness? The Case of Mad Money

We use the popular television show Mad Money, hosted by Jim Cramer, to test theories of attention and limits to arbitrage. Stock recommendations on Mad Money constitute attention shocks to a large audience of individual traders. We find that stock recommendations lead to large overnight returns that subsequently reverse over the next few months. The spike-reversal pattern is strongest among small, illiquid stocks that are hard to arbitrage. Using daily Nielsen ratings as a direct measure of attention, we find that the overnight return is strongest when high-income viewership is high. We also find weak price effects among sell recommendations. Taken together, the evidence supports the retail attention hypothesis of Barber and Odean (Barber, B., T. Odean. 2008. All that glitters: The effect of attention and news on the buying behavior of individual and institutional investors. Rev. Financial Stud. 21(2) 785–818) and illustrates the potential role of media in generating mispricing. This paper was accepted by Brad Barber, Teck Ho, and Terrance Odean, special issue editors.

Mad Cows and Mad Money: Problems of Risk in the Making and Understanding of Policy

Risk is now being widely used both as a way of understanding policy and decision-making, and as a way of making decisions. However, there is little agreement on how risk is defined. For some risk is objective and measurable, while for others risk is subjective. What this article demonstrates is that because risk is a contested concept, it is extremely difficult to use it either as a tool for analysing government or for making decisions. In their different ways both scientists and social theorists assume an objectivity to risk. However, risk is not objective but contingent, and depends on decisions that are often related to issues of power. Consequently both governments and analysts are caught between matching subjective and political notions of risk with objective risk assessment. Two case studies are used, BSE in cows and British exchange rate policy, to demonstrate the difficulties in using risk as a way of analysing the policy process and for making decisions.

Caught up in the Madness? State Power and Transnational Organized Crime in the Work of Susan Strange

Susan Strange left an impressive legacy of scholarship on international relations.1 She consistently challenged the field for its tendency to privilege the state and discount the role of markets and transnational actors. For Strange, power was contested by states and nonstate actors, and bargaining between these actors in the context of transnational relations remained a central theme in her work. In two of her last major books - The Retreat of the State: The Diffusion of Power in the World Economy, and Mad Money* - Strange extended her approach to the challenges to state power posed by transnational organized crime. In many ways, this extension was a professional risk. Transnational crime lies on the fringes of international relations (IR) scholarship and is often seen as too journalistic, as an issue plagued by the absence of reliable data, and even as too dangerous for the researcher to pursue. Strange's work in this context helped to legitimize scholarly inquiry on transnational crime. However, Strange's overreliance on the very field she sought to challenge limits the insights of her approach. The problems are at least twofold and center on questions of theory and threat. On questions of theory, Strange chastises the field of IR for the problematic concepts and assumptions of its state-centric approach. Nonetheless, she runs into similar pitfalls by drawing on elements of this approach to explain the nature and influence of nonstate actors. On questions of threat, Strange chastises the state-centric approach for failing to capture the erosion of state authority in the face of transnational crime. Nonetheless, she largely accepts as given the arguments of state actors concerning the nature and extent of this erosion. By failing to explore the extent to which

Mad Cows, Mad Corn, & Mad Money: Applying What We Know About the Perceived Risk of Technologies to the Perceived Risk of Securities

Thirty years of research has shown that the concept of risk in people's minds is complex and influenced by many factors. Lessons learned from studies on the perceived risk of technologies and activities (such as eating British beef or genetically modified food) are applied to the perceived risk of securities. How investors may be affected by qualitative dimensions of risk, affect and imagery, and socio-political attitudes and values, are highlighted. Specific recommendations are given for improving portfolio management with a qualitative, multi-dimensional, values-based approach that complements more traditional approaches to analysis of securities.

Book Review: Mad money

Book Review: Mad money

What Theory? The Theory in Mad Money

Mad Money (Manchester University Press, 1998) is the completely rewritten and updated version of Casino Capitalism (Blackwells, 1986). It has been suggested--of both volumes--that there was no theory underlying Strange's discussion of the international financial system in them. This, she argues in this Working Paper, is emphatically not the case. Both volumes always implicitly, and often explicitly, are underpinned by the dominant themes that are reflected in Strange's work since the publication of 'International Relations and International Economics: A Case of Mutual Neglect', International Affairs, 46 (2) 1970. These themes are threefold: Firstly a need to privilege the politics of the international financial system in the study of international relations; a discipline too long myopic in its focus on violent conflict and war between states at the expense of all else. (ii) A need to go beyond liberal political and economic theory and recognise the significance of 'structural power' in the international system. (iii) A need to recognise that 'the areas of significant ignorance' in our understanding of the role of the international financial system in an era of technological revolution and globalisation are becoming greater rather than smaller. For Strange, the structural power of capital is not constant and, therefore, cannot be accommodated in the logic of liberal economics. Thus, using the dictionary definition of mad--erratic, unpredictable, irrational behaviour, damaging not only to sufferers but also to others--we have, as she puts it 'mad money'.

A New International Financial Architecture?

Books reviewed in this article:D. Aldcroft and M. Oliver, Exchange Rate Regimes in the 20th CenturyD. Begg, J. Von Hagen, C. Wyplosz and K. F. Zimmermann, EMU: Prospects and Challenges for the EuroK. Dowd and R. Timberlake (eds), Money and the Nation StateH. Clark Johnson, Gold, France and the Great Depression 1919‐1932S. Strange, Mad Money

Mad money: when markets outgrow governments

One of the founders of the field of international political economy addresses the reasons for the volatility of global markets in recent years

Smoking is Cool

THE CIGARETTES WERE CALLED Velvets, and my job was to smoke them. was given a purple velvet suit and a cheat sheet listing the names of bars was permitted to smoke in and drinks was allowed to order, and was assigned a partner, a fashion design school dropout who wore a red velvet dress and whose name was Karen. My suit coat had wide, baggy inside pockets which kept stuffed with the cigarettes would distribute free to the bars' other patrons. Karen was issued a clasp handbag for the same purpose. Don't let them know you're working for instructed our supervisor, Nadine, a stark-faced businesswoman with efficient, unadorned hands. This was at headquarters, a narrow downtown storefront with blacked-out windows that in recent years had been home to several fly-by-night religious groups and a Reform Party campaign office. It was our first night, our pockets full of mad money. Offer them the product as if ifs from the bottom of your heart, she said. Like this. She proffered a Velvet Long to Karen, who accepted it between her index and middle fingers. Obliged, Karen said, and swept her hair over her shoulder with an ironic flourish. She turned to me and batted her eyelashes. Cigarette? Good, said Nadine. Except that Richard is a man. Men don't smoke Velvet Longs. Women smoke Velvet Longs. Men smoke Velvets. thought we were clear on that. I was just practicing, Karen said. hadn't taken the cigarette, and she popped it into her mouth. She didn't light it. Nadine gave her a long look, then sighed. Okay, then. Off you go. Happy hour is nigh. She moved between us to the door, opened it with her key and held it as she ushered us out with a flapping hand. We stepped into the cold and early dark. If you're going to seduce somebody, she called after us, do it on your own time!