Mad Money Research Articles

Institutional/retail investor active attention and behavior: Firm coverage on Mad Money

We find that firm coverage on the popular Mad Money Show is significantly associated with institutional and retail investor active attention, proxied by SEC EDGAR queries and posts on StockTwits. The association strengths differ by recommendation directions (buy or sell) and a firm’s exposure on the Show. The associations remain after controlling for selection bias, other firm-specific news, and moderating events (e.g., Superbowl and Olympics). The increased investor active attention is associated subsequently with abnormal trading volumes and short-sales activities of institutional/retail investors, and retail investor portfolios. While the opening price captures most of the significant association between Show coverage and next day’s returns, the extent of subsequent reversals varies by Show segment, recommendation direction and moderators (e.g., firm-coverage frequency on the same Show). No abnormal returns are associated with any pre-Show publicity about upcoming guest interviews. Our findings are consistent with the association of the media and its potential influencers with the limited active attention budgets of investors, different behaviors of retail and institutional investors, and the shorting of contrarian investors.

Does the Mad Money Show Cause Investors to Go Madly Attentive?

Does the Mad Money Show Cause Investors to Go Madly Attentive?

Does the Mad Money Show cause investors to go madly attentive?

Does the Mad Money Show cause investors to go madly attentive?

Jim Cramer’s Mad Money Charitable Trust Performance and Factor Attribution

This article analyzes the complete historical performance of Jim Cramer’s Action Alerts PLUS portfolio from 2001 through 2017, which includes many of the stock recommendations made on Cramer’s TV show, Mad Money . Both since inception of the portfolio and since the start of Mad Money in 2005 (when the portfolio was converted into a charitable trust), Cramer’s portfolio has underperformed the S&P 500 total return index both on an overall returns basis and in Sharpe ratio. Being the first to analyze Cramer’s post-crisis return history, these findings contrast with previous studies, which analyzed Cramer’s outperformance in short windows before the 2008 financial crisis. Using factor analysis, we find that Cramer’s portfolio returns are primarily driven by underleveraged exposure to market returns and, in some specifications, tilting toward small-cap stocks, growth stocks, and stocks with poor earnings quality.

Beauty-Contests in the Age of Financialization: Information Activism and Retail Investor Behavior

Keynes (The General Theory of Employment, Interest and Money, Harcourt Brace and Co., New York, 1936) had rightfully argued that picking stocks is akin to a beauty contest. The chances of winning are amplified if one's choice matches the likelihood of the panel's choice. In this era of financialization, where profit-making has shifted to speculative sways rather than fundamental trade and commodity production measures (Krippner, Socio-Econ Rev 3(2): 173-208, 2005), similar beauty contests have become even more acute. Online, real-time media channels along with pervasive investments applications have ushered in unprecedented online financial information and retail investor interest, ranging from dealing in penny stocks to sentiment-based trading. More than information sources, similar investment sites compete to recommend investment directions and strategies, not driven by strict fundamentals used by “arbitrageurs” or rational speculators but on pseudo-signals proffered by various information investment channels with varying degrees of credibility. This behavior, referred to herein as information activism, concomitantly adds a sociopsychological dimension to the concept of financialization (Lagoarde-Segot, Int Rev Financial Anal 2016) – wherein technology-driven information reach and range contribute to financial dominance of financial actors and practices. Using information activism as a lens, this research empirically evidences the extent to which information activism affects retail investor behavior under various market conditions. This study examines the differential effects of two primary, albeit reputable, sources of information activism: an investment news channel (CNBC – Mad Money) and an online financial blog (SeekingAlpha), and the effect on investor behavior during the 2008 financial crisis. In identifying the specific downstream effects of information activism on capital markets and investor behavior, factors related to investor behavior, such as trading volume and price reaction, are analyzed surrounding information activism events. Results indicate that retail investors appear to rely on online information activists during uncertain economic conditions. Findings denote that abnormal returns are associated with information activism during uncertain economic conditions and for buy recommendations when information asymmetry is high. Abnormal trading volume is also associated with information activism during economic uncertainty and with buy recommendations when information asymmetry is high particularly for stocks exchanges where unsophisticated investors tend to trade more heavily.

The impact of foreign films on Nigerian youths using ‘Mad Money’ as a paradigm

This paper investigated the impact of foreign films on Nigerian youths with a focus on (MAD MONEY). The stimulus for this research was bore out of the insinuation that foreign Films are another form of cultural imperialism and that there has been a gradual shift of interest from local films to foreign films. Based on the above notion, the nation now looks on helplessly while foreign culture influences and envelope the minds of youths through all forms of Western Culture of Self-emulation. These foreign cultures, is unique, peculiar and entirely different evolution in this part of the world. The survey research method was used to gather data. Questionnaires were administered to a sample of 100 youths living within Plateau state University Bokkos. The five point Likert Method was used to analyse data. The result however showed that, a good number of Nigerian youths watch foreign films, as a result, it was established that, foreign films provide an avenue for cultural imperialism and encourage the steady rise of immorality amongst youths, thus having a negative effect on them. As such, certain recommendations were made with the aim of curbing the situation before a massive infiltration and profound degradation of our moral code occurs. One of such recommendations was that, the Nigerian Film and Video Censors Board (NFVCB) should effectively screen foreign movies before they cross the threshold of our market.

Jim Cramer's Mad Moneyy Charitable Trust Performance and Factor Attribution

This study analyzes the complete historical performance of Jim Cramer’s Action Alerts PLUS portfolio from 2001 to 2016 which includes many of the stock recommendations made on Cramer’s TV show “Mad Money”. Both since inception of the portfolio and since the start of “Mad Money” in 2005 (when it was converted into a charitable trust), Cramer’s portfolio has underperformed the S&P 500 total return index and a basket of S&P 500 stocks that does not reinvest dividends (both on an overall returns basis and in Sharpe ratio). These findings contrast with previous studies which analyzed Cramer’s outperformance in short windows before the 2008 financial crisis. Using factor analysis, we find that Cramer’s portfolio returns are primarily driven by underlevered exposure to market returns and in some specifications tilting toward small cap stocks, growth stocks and stocks with low quality of earnings. These results have broad implications for market efficiency, the usefulness of single name stock recommendations made on television, financial education, and the implementation of academic factors thematic in Cramer’s portfolio.

The impact of Mad Money recommendations during bull and bear markets

Purpose – The purpose of this paper is to examine semi-strong market efficiency by observing the behavioral finance implications of Jim Cramer’s recommendations in bull vs bear markets. The authors extend the literature by analyzing investor reaction through the lenses of prospect theory, overreaction, and herding. Design/methodology/approach – The authors test for abnormal returns in response to Mad Money buy and sell recommendations. The authors use a sample of buy and sell recommendations from MadMoneyRecap.com from July 28, 2005 through February 9, 2009. The 3.5-year time period is the most recent and comprehensive set of Mad Money recommendations that has been tested to date. Findings – The results indicate market inefficiency at the semi-strong level. Furthermore, the findings highlight the loss aversion tendencies of investors in regards to prospect theory of Kahneman and Tversky (1979) as well as the disposition effect of Shefrin and Statman (1985). Evidence also exists consistent with the herding and overreaction hypotheses. Practical implications – The evidence suggests contrarian behavior in which investors respond positively to good news in bad times – perhaps, in effort to stay the course and at least break even. This behavior may suggest that losers tend to hold on to losses in hopes of recouping them. Thus, positive information in bad times could further persuade market participants to hang on to or buy more of losers, while also persuading non-shareholders to buy in as well. Originality/value – Though other studies including Kenny and Johnson (2010) have estimated abnormal returns in response to analyst recommendations, to the knowledge, none has examined behavioral implications of investor reaction to buy and sell recommendations in both bull and bear markets. Furthermore, the study captures a longer bull and bear market and covers two definitions of such markets.

Mad Money: Does the combination of stock recommendation and show segment matter?

Few observable patterns of stimuli appear to consistently affect retail investor behavior. This study is motivated by what is presumably the most prominent media source of advice for retail investors in the United States, Jim Cramer’s Mad Money broadcast. We analyze return metrics of stocks recommended by Jim Cramer. We differentiate among five different recommendations and across five different segments of the show to determine if pricing behavior differs in magnitude and persistence, depending on the nature of the recommendation and the segment of the show in which the recommendation appears. Results indicate that the pricing impact is greatest for stocks discussed on longer-duration segments of the show and that there is an asymmetric effect in terms of “buy” versus “sell” recommendations. The results also highlight the tendency of the impact to be larger for smaller market capitalization firms.

Mad Money: Rethinking Private Placements

Currently, regulations try to limit unregistered sales of stock (private placements) to the “smart money,” either by informing investors through disclosure or excluding unsophisticated investors from the market. In theory, these smart-money approaches promote the dual goals of capital formation and investor protection. But in practice, regulators have struggled to craft effective disclosure or screening mechanisms. In light of these failures, this Article advocates for a new approach — investment caps that allow every investor a limited amount of “mad money” to invest in risky private placements. This mad-money approach can protect investors by encouraging basic diversification and liquidity, while advancing capital formation at least as well as alternatives.

Stocks for the long run: the definitive guide to financial market returns & long-term investment strategies

This is the stock-investing classic - updated to help you win in today's chaotic global economy. Much has changed since the last edition of Stocks for the Long Run. The financial crisis, the deepest bear market since the Great Depression, and the continued growth of the emerging markets are just some of the contingencies directly affecting every portfolio in the world. To help you navigate markets and make the best investment decisions, Siegel has updated his bestselling guide to stock market This new edition of Stocks for the Long Run answers all the important questions of today: How did the crisis alter the financial markets and the future of stock returns? What are the sources of long-term economic growth? How does the Fed really impact investing decisions? you hedge against currency instability? Stocks for the Long Run, Fifth Edition, includes brand-new coverage of: the financial crisis - Siegel provides an expert's analysis of the most important factors behind the crisis; the state of current stability/instability of the financial system and where the stock market fits in; and the viability of value investing as a long-term strategy; China and India - The economies of these nations are more than one-third larger than they were before the 2008 financial crisis; you'll get the information you need to earn long-term profits in this new environment. Global markets - Learn all there is to know about the nature, size, and role of diversification in today's global economy; Siegel extends his projections of the global economy until the end of this century; market valuation - Can stocks still provide 6 to 7 percent per year after inflation? This edition forecasts future stock returns and shows how to determine whether the market is overvalued or not. Essential reading for every investor and advisor who wants to fully understand the forces that move today's markets, Stocks for the Long Run provides the most complete summary available of historical trends that will help you develop a sound and profitable long-term portfolio. Praise for Stocks for the Long Run: Jeremy Siegel is one of the great ones. (Jim Cramer, CNBC's Mad Money). [Jeremy Siegel's] contributions to finance and investing are of such significance as to change the direction of the profession. (The Financial Analyst Institute). A simply great book. (Forbes). One of the top ten business books of the year. (Businessweek). Should command a central place on the desk of any 'amateur' investor or beginning professional. (Barron's). Siegel's case for stocks is unbridled and compelling. (USA Today). A clearly written, neatly organized, highly persuasive exposition that lifts the veil of mystery from investing. (John C. Bogle, founder and former Chairman, The Vanguard Group). A book that all investors-nervous Nellies in particular-should read. (Investing.com).

Mad Money Stock Calls and Retail Investor Behavior

We analyze three short-term return metrics (Close-to-Open, Open-to-Close, and Close-to-Close) of stocks recommended by Jim Cramer on his CNBC show Mad Money. We differentiate among five different recommendations and across five different segments of the show. The objective is to determine if the pricing impact differs in magnitude and persistence, depending on the nature of the recommendation and the segment of the show in which the recommendation appears. Results indicate that the pricing impact is greatest for stocks discussed on longer-duration segments of the show. An asymmetric effect in terms of buy versus sell recommendations is also found.

“Booyah Jim”: The construction of hegemonic masculinity in CNBC ‘Mad Money’ phone-in interactions

This paper presents hegemonic masculinity as it is achieved during interactions between television host Jim Cramer and his callers in the “Lightening Round” segment on the CNBC television show “Mad Money”. Cramer's persona and interactions adhere to a hegemonic masculinity dominant in American culture, and they create a sphere in which it is the only normative identity possible. This hegemonic masculinity is created by the use of specific phrases (e.g. the “booyah” salutation), actions (e.g. compliments to the host), by the insertion of sports as a topic of discussion, and by Cramer's dominant positioning as an expert. After presenting these features we demonstrate how this arena creates problems for the very few female callers participating in it. We therefore conclude that the “Lightening Round” helps to construct and reproduce masculinist authority in this mass-mediated window into the world of finance.

Pound foolish: exposing the dark side of the personal finance industry

If you ve ever bought a personal finance book, watched a TV show about stock picking, listened to a radio show about getting out of debt, or attended a seminar to help you plan for your retirement, you ve probably heard some version of these quotes: What s keeping you from being rich? In most cases, it simply a lack of belief. SUZE ORMAN, The Courage to Be Rich Are you latte-ing away your financial future? DAVID BACH, Smart Women Finish Rich I know you re capable of picking winning stocks and holding on to them. JIM CRAMER, Mad Money They re common refrains among personal finance gurus. There s just one problem: those and many similar statements are false. For the past few decades, Americans have spent billions of dollars on personal finance products. As salaries have stagnated and companies have cut back on benefits, we ve taken matters into our own hands, embracing the can-do attitude that if we re smart enough, we can overcome even daunting financial obstacles. But that s not true. In this meticulously reported and shocking book, journalist and former financial columnist Helaine Olen goes behind the curtain of the personal finance industry to expose the myths, contradictions, and outright lies it has perpetuated. She shows how an industry that started as a response to the Great Depression morphed into a behemoth that thrives by selling us products and services that offer little if any help. Olen calls out some of the biggest names in the business, revealing how even the most respected gurus have engaged in dubious, even deceitful, practices from accepting payments from banks and corporations in exchange for promoting certain products to blaming the victims of economic catastrophe for their own financial misfortune. Pound Foolish disproves many myths about spending and saving, including: Small pleasures can bankrupt you: Gurus popularized the idea that cutting out lattes and other small expenditures could make us millionaires. But reducing our caffeine consumption will not offset our biggest expenses: housing, education, health care, and retirement. Disciplined investing will make you rich: Gurus also love to show how steady investing can turn modest savings into a huge nest egg at retirement. But these calculations assume a healthy market and a lifetime without any setbacks two conditions that have no connection to the real world. Women need extra help managing money: Product pushers often target women, whose alleged financial ignorance supposedly leaves them especially at risk. In reality, women and men are both terrible at handling finances. Financial literacy classes will prevent future economic crises: Experts like to claim mandatory sessions on personal finance in school will cure many of our money ills. Not only there little evidence this true, the entire movement largely funded and promoted by the financial services sector. Weaving together original reporting, interviews with experts, and studies from disciplines ranging from behavioral economics to retirement planning, Pound Foolish is a compassionate and compelling book that will change the way we think and talk about our money.

Malthus Our Contemporary?: Toward a Political Economy of Sex

Species Means Guilt. --Bruce Andrews (1) ... desire, as Aristotle knew, is all angle, and so he gave us math to keep track of our loves: Number, he said, has two senses: what is counted or countable, and that by which we count. --Angie Estes, Take Cover, Tryst (2) I BEGIN WITH A REMARK OF HAZLITT, WHO IN THE SPIRIT OF THE AGE glossed an aspect of what we might call Malthus Meme: There is this to be said for Mr. that in speaking of him, one knows what one is talking about. (3) But do we know what we're talking about when we talk about Malthus? This essay proposes to reopen question of Malthus, and of Malthusian reckoning--or rather, to track many ways Malthusian political economy might provide one horizon for a reckoning historicizable yet interminable and trans-specific. Or perhaps it is more precise to say that this essay partakes of, even as it registers, a return to Malthus in several fields. Malthus is, among many things, a Romantic theorist of change in biological populations; he is also necessarily a theorist of time--the time of production and reproduction within and across generations (and indeed across species), how this timing might be sped or slowed. Malthus emerges here as a sexual theorist worth taking seriously; his work intriguingly anticipates possibility of rethinking biological networks through information theory. This essay proposes as well that Malthusian counting is not an arithmetic, geometric, or even algorithmic operation so much as a matching operation--and here I draw on recent work by (among others) Marjorie Levinson. For one wittily efficient take on Malthus Meme, consider Stephen Leacock, Canadian poet and humorist, in his Depression-era Oh! Mr. Malthus! (1936): Mother, here comes Mother, hold me tight! Look! It's Mr. Mother! Hide me out of sight. This was cry of little Jane In bed she moaning lay, Delirious with Stomach Pain, That would not go away. All because her small Existence Over-pressed upon Subsistence; Human Numbers didn't need her; Human Effort couldn't feed her. Little Janie didn't know Geometric Ratio. Poor Wee Janie had never done Course Economics No. I; Never reached in Education of Population,--Theories which tend to show Just how far our Food will go, Mathematically found Just enough to go around. This, my little Jane, is why Pauper Children have to die. Pauper Children underfed Die delirious in Bed; Thus at Malthus's Command Match with true Demand. (4) Theories of Population, The Geometric Ratio, subsistence, Supply and Demand--all are keywords of Malthusian political economy, ratio perhaps most marked as a Malthusian phrase, designating rate of increase of animal populations (destined to outstrip any increase in vegetal kingdom, which according to Malthus would increase only along an ratio). Malthus's concerns and his conceptual apparatus were of course those of his age, yet as Leacock's bouncing couplets attest, they were still and newly citable in 1930s; and in several ways, mutatis mutandis, Malthus's concerns remain ours. It seems timely, then, to assess whether and how Malthus might still be to think with, in Claude Levi-Strauss's terms. (5) That Malthus is considered still good to think with is suggested by any Google search as well as by more specialized research inquiries into demography, population theory, and indeed, political economy. An under-acknowledged Malthusian formula appears in popular TV: on Daily Show, Jon Stewart casually invokes geometric versus arithmetic progression in a conversation with his guest Jim Cramer, of CNBC's Mad Money (airdate March 12, 2009). And those contributing to more recondite conversations also invoke Malthus: London Review of Books recently published a letter from historian Jonathan Steinberg of University of Pennsylvania, who notes that Malthus was a sharp critic of Ricardo's commitment to the illusion that economics could be reduced to mathematical formulae. …

How Mad Is Mad Money? Jim Cramer as a Stock Picker and Portfolio Manager

How Mad Is Mad Money? Jim Cramer as a Stock Picker and Portfolio Manager

How Mad Is Mad Money? Jim Cramer as aStock Picker and Portfolio Manager

This article examines a widely popular and controversial source of investment advice: buy and sell recommendations made by Jim Cramer on his popular nightly <i>Mad Money</i> show on CNBC. The results show that Cramer’s recommendations impact share prices of the companies that he mentions. The effects are short-lived and reverse for buy recommendations, although they persist for sell recommendations. Returns for a portfolio of Cramer recommendations are significantly different from zero for some subperiods. Factor analysis suggests that these returns are driven by beta exposure, smaller stocks, growth-oriented stocks, and momentum effects. Overall performance is average after adjusting for factor exposures. Further analysis indicates a significant cluster of new or updated analysts’ ratings of stocks just before and just after a Cramer recommendation. The results provide insights into the performance of a popular but controversial market pundit and should be of interest to followers and detractors seeking to develop an active, or alpha-generating, investment strategy. <b>TOPICS:</b>Factor-based models, portfolio construction, equity portfolio management

Management Insights

Management Insights

Short Selling Behavior and Mad Money

AbstractWe examine 1,234 buy recommendations from Jim Cramer's Mad Money television show. Consistent with prior research, we report positive abnormal returns immediately after buy recommendations, followed by a reversal, indicative of an overpricing event. We also find a marked increase in short selling. Our results show a positive association between shorting and the buy recommendations even after controlling for factors shown in the literature to influence shorting. We do not find similar effects after sell recommendations. These results suggest that short sellers act to exploit short‐term overpricing arising from behavioral biases of some investors.

Market Madness? The Case of Mad Money

Market Madness? The Case of Mad Money