1 Introduction
1.1 Ranking evaluation approaches
Ranking name | Rating agency | Abbreviation used in this paper | Type of ranking | Measure | Measurement | Number of analysts per industry | Publication Month |
---|---|---|---|---|---|---|---|
“All-America Research Team” | Institutional Investor | I/I | Subjective / Qualitative | 12 Criteria (most important: industry knowledge and integrity; least important: stock picking, and accuracy of EPS) | Survey | 3 + Runners-up | October |
“Top Earnings Estimators” | StarMine | STM-TEE | Objective / Quantitative | Accuracy and timing of earnings estimations | Calculation - EPS | 3 | Octobera
|
“Top Stock Pickers” | StarMine | STM-TSP | Objective / Quantitative | Excess returns on individual portfolios | Calculation - Recommendations | 3 | Octobera
|
“Best on the Street” | The Wall Street Journal | WSJ | Objective / Quantitative | Total score for stock returns | Calculation - Recommendations | 5 in 2003–2011, 3 in 2012, 2013 | May |
2 Data and descriptive statistics
Election year | All analysts | Non-stars ever elected as stars | Stars | Portion of analysts in entire groups of stars | Portion of analysts in number-one ranked stars | ||||||
---|---|---|---|---|---|---|---|---|---|---|---|
I/I | STM-TEE | STM-TSP | WSJ | I/I-1 | STM-TEE-1 | STM-TSP-1 | WSJ-1 | ||||
2003 | 4118 | 30 % | 12 % | 6 % | 3 % | 3 % | 5 % | 1.3 % | 0.9 % | 1.0 % | 0.9 % |
2004 | 4001 | 30 % | 13 % | 6 % | 3 % | 3 % | 5 % | 1.4 % | 1.1 % | 1.0 % | 1.1 % |
2005 | 4038 | 31 % | 14 % | 6 % | 3 % | 3 % | 5 % | 1.4 % | 1.1 % | 1.0 % | 1.0 % |
2006 | 4168 | 32 % | 14 % | 6 % | 4 % | 4 % | 5 % | 1.3 % | 1.3 % | 1.3 % | 0.9 % |
2007 | 4208 | 32 % | 14 % | 5 % | 4 % | 3 % | 5 % | 1.3 % | 1.3 % | 1.3 % | 0.9 % |
2008 | 4160 | 32 % | 14 % | 5 % | 4 % | 4 % | 4 % | 1.3 % | 1.3 % | 1.4 % | 0.9 % |
2009 | 3920 | 35 % | 12 % | 3 % | 4 % | 4 % | 4 % | 1.0 % | 1.4 % | 1.4 % | 0.7 % |
2010 | 3827 | 34 % | 12 % | 1 % | 4 % | 4 % | 5 % | 1.5 % | 1.5 % | 1.4 % | 1.0 % |
2011 | 3976 | 34 % | 11 % | 1 % | 4 % | 4 % | 5 % | 1.3 % | 1.4 % | 1.4 % | 0.9 % |
2012 | 3932 | 31 % | 12 % | 4 % | 4 % | 4 % | 3 % | 0.9 % | 1.4 % | 1.3 % | 1.0 % |
2013 | 3882 | 29 % | 12 % | 4 % | 4 % | 4 % | 3 % | 1.4 % | 1.5 % | 1.5 % | 1.1 % |
Average | 4021 | 32 % | 13 % | 4 % | 4 % | 4 % | 4 % | 1.3 % | 1.3 % | 1.3 % | 0.9 % |
Overall | 8459 | 27 % | 27 % | 7 % | 11 % | 12 % | 15 % | 2.0 % | 4.9 % | 5.4 % | 4.4 % |
Panel A. Entire groups of stars | ||||||||||||
Year | Proportion of the same analysts (# of the same analysts/# of star analysts) | |||||||||||
WSJ in I/I | STM-TSP in I/I | STM-TEE in I/I | I/I in WSJ | STM-TSP in WSJ | STM-TEE in WSJ | I/I in STM-TSP | WSJ in STM-TSP | STM-TEE in STM-TSP | I/I in STM-TEE | WSJ in STM-TEE | STM-TSP in STM-TEE | |
2003 | 15 % | 11 % | 15 % | 19 % | 26 % | 12 % | 25 % | 45 % | 13 % | 37 % | 23 % | 14 % |
2004 | 9 % | 8 % | 12 % | 12 % | 28 % | 10 % | 18 % | 47 % | 11 % | 26 % | 17 % | 10 % |
2005 | 8 % | 8 % | 12 % | 12 % | 28 % | 9 % | 16 % | 40 % | 14 % | 23 % | 12 % | 14 % |
2006 | 8 % | 7 % | 16 % | 11 % | 32 % | 10 % | 11 % | 41 % | 23 % | 24 % | 12 % | 22 % |
2007 | 6 % | 9 % | 11 % | 7 % | 28 % | 12 % | 15 % | 37 % | 21 % | 16 % | 15 % | 19 % |
2008 | 6 % | 10 % | 11 % | 8 % | 26 % | 10 % | 15 % | 32 % | 22 % | 16 % | 11 % | 21 % |
2009 | 15 % | 17 % | 13 % | 10 % | 23 % | 14 % | 13 % | 27 % | 21 % | 9 % | 16 % | 19 % |
2010 | 12 % | 16 % | 11 % | 3 % | 25 % | 13 % | 6 % | 33 % | 18 % | 4 % | 16 % | 17 % |
2011 | 7 % | 6 % | 9 % | 2 % | 29 % | 11 % | 2 % | 38 % | 19 % | 3 % | 14 % | 19 % |
2012 | 4 % | 7 % | 10 % | 7 % | 25 % | 7 % | 8 % | 20 % | 22 % | 10 % | 5 % | 20 % |
2013 | 5 % | 12 % | 11 % | 6 % | 27 % | 9 % | 11 % | 20 % | 18 % | 9 % | 6 % | 17 % |
Avg. | 9 % | 10 % | 12 % | 9 % | 27 % | 11 % | 13 % | 35 % | 18 % | 16 % | 13 % | 18 % |
Panel B. Number-one ranked analysts | ||||||||||||
Year | Proportion of the same analysts (# of the same analysts/# of star analysts) | |||||||||||
WSJ-1 in I/I-1 | STM-TSP-1 in I/I-1 | STM-TEE-1 in I/I-1 | I/I-1 in WSJ-1 | STM-TSP-1 in WSJ-1 | STM-TEE-1 in WSJ-1 | I/I-1 in STM-TSP-1 | WSJ-1 in STM-TSP-1 | STM-TEE-1 in STM-TSP-1 | I/I-1 in STM-TEE-1 | WSJ-1 in STM-TEE-1 | STM-TSP-1 in STM-TEE-1 | |
2003 | 5 % | 2 % | 9 % | 7 % | 17 % | 0 % | 2 % | 17 % | 5 % | 13 % | 0 % | 5 % |
2004 | 2 % | 2 % | 7 % | 2 % | 14 % | 2 % | 2 % | 14 % | 2 % | 9 % | 2 % | 2 % |
2005 | 0 % | 5 % | 5 % | 0 % | 18 % | 5 % | 7 % | 16 % | 9 % | 6 % | 4 % | 8 % |
2006 | 2 % | 3 % | 5 % | 2 % | 22 % | 5 % | 3 % | 15 % | 17 % | 5 % | 4 % | 18 % |
2007 | 0 % | 4 % | 2 % | 0 % | 21 % | 0 % | 4 % | 14 % | 9 % | 2 % | 0 % | 9 % |
2008 | 0 % | 5 % | 5 % | 0 % | 15 % | 5 % | 5 % | 10 % | 10 % | 5 % | 4 % | 11 % |
2009 | 0 % | 5 % | 5 % | 0 % | 16 % | 5 % | 4 % | 11 % | 7 % | 4 % | 4 % | 7 % |
2010 | 2 % | 5 % | 4 % | 2 % | 14 % | 2 % | 5 % | 11 % | 7 % | 3 % | 2 % | 7 % |
2011 | 2 % | 2 % | 4 % | 2 % | 9 % | 5 % | 2 % | 7 % | 5 % | 4 % | 4 % | 5 % |
2012 | 0 % | 3 % | 5 % | 0 % | 13 % | 0 % | 2 % | 9 % | 13 % | 4 % | 0 % | 13 % |
2013 | 0 % | 0 % | 2 % | 0 % | 7 % | 0 % | 0 % | 5 % | 5 % | 2 % | 0 % | 5 % |
Avg. | 1 % | 3 % | 5 % | 2 % | 15 % | 3 % | 3 % | 12 % | 8 % | 5 % | 2 % | 8 % |
Election year | Total number of firms | Portion of firms covered by | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
Stars
| Entire groups of stars | Number-one ranked stars | ||||||||
I/I | STM-TEE | STM-TSP | WSJ | I/I-1 | STM-TEE-1 | STM-TSP-1 | WSJ-1 | |||
2003 | 3580 | 50 % | 31 % | 18 % | 19 % | 29 % | 12 % | 7 % | 7 % | 9 % |
2004 | 3660 | 50 % | 27 % | 17 % | 20 % | 29 % | 10 % | 8 % | 8 % | 9 % |
2005 | 3801 | 50 % | 27 % | 19 % | 19 % | 29 % | 9 % | 8 % | 8 % | 8 % |
2006 | 3935 | 48 % | 24 % | 22 % | 22 % | 26 % | 9 % | 9 % | 10 % | 7 % |
2007 | 3927 | 53 % | 24 % | 22 % | 22 % | 30 % | 9 % | 9 % | 10 % | 7 % |
2008 | 3752 | 51 % | 25 % | 25 % | 25 % | 27 % | 10 % | 13 % | 13 % | 8 % |
2009 | 3495 | 49 % | 18 % | 25 % | 25 % | 28 % | 9 % | 10 % | 11 % | 8 % |
2010 | 3356 | 52 % | 12 % | 27 % | 27 % | 29 % | 12 % | 12 % | 12 % | 8 % |
2011 | 3414 | 49 % | 12 % | 23 % | 22 % | 29 % | 12 % | 10 % | 9 % | 8 % |
2012 | 3390 | 49 % | 21 % | 25 % | 22 % | 20 % | 9 % | 11 % | 11 % | 9 % |
2013 | 3425 | 51 % | 24 % | 24 % | 25 % | 20 % | 10 % | 12 % | 12 % | 8 % |
Average | 3612 | 50 % | 22 % | 22 % | 23 % | 27 % | 10 % | 10 % | 10 % | 8 % |
Overall | 6443 | 71 % | 36 % | 47 % | 50 % | 58 % | 20 % | 29 % | 32 % | 30 % |
Election year | Entire sample |
Stars
| Entire groups of stars | Number-one ranked stars | ||||||
---|---|---|---|---|---|---|---|---|---|---|
I/I | STM-TEE | STM-TSP | WSJ | I/I-1 | STM-TEE-1 | STM-TSP-1 | WSJ-1 | |||
2003 | 33,233 | 20 % | 10 % | 4 % | 5 % | 8 % | 2.0 % | 1.3 % | 1.3 % | 1.7 % |
2004 | 32,600 | 20 % | 9 % | 4 % | 5 % | 8 % | 1.9 % | 1.5 % | 1.6 % | 1.9 % |
2005 | 32,175 | 21 % | 9 % | 4 % | 5 % | 8 % | 1.5 % | 1.6 % | 1.5 % | 1.8 % |
2006 | 32,005 | 20 % | 8 % | 6 % | 6 % | 7 % | 1.7 % | 2.1 % | 2.2 % | 1.4 % |
2007 | 34,254 | 27 % | 8 % | 5 % | 10 % | 12 % | 1.8 % | 1.6 % | 2.0 % | 5.9 % |
2008 | 36,551 | 25 % | 7 % | 6 % | 7 % | 11 % | 1.8 % | 2.7 % | 2.9 % | 6.0 % |
2009 | 33,217 | 22 % | 5 % | 5 % | 10 % | 11 % | 1.5 % | 1.6 % | 2.1 % | 4.9 % |
2010 | 31,686 | 17 % | 2 % | 6 % | 6 % | 7 % | 2.1 % | 2.3 % | 2.3 % | 1.3 % |
2011 | 30,607 | 16 % | 2 % | 5 % | 4 % | 7 % | 2.0 % | 1.8 % | 1.6 % | 1.7 % |
2012 | 29,181 | 18 % | 6 % | 6 % | 5 % | 4 % | 1.6 % | 2.0 % | 2.3 % | 1.7 % |
2013 | 27,412 | 19 % | 6 % | 6 % | 6 % | 5 % | 1.8 % | 2.4 % | 2.2 % | 1.6 % |
Average | 32,084 | 20 % | 6 % | 5 % | 6 % | 8 % | 1.8 % | 1.9 % | 2.0 % | 2.7 % |
Overall | 291,731 | 19 % | 6 % | 6 % | 7 % | 9 % | 1.7 % | 2.1 % | 2.3 % | 2.7 % |
3 Results: risk-adjusted portfolio returns
3.1 Methods
-
Rm τ is a daily market return
-
Rf τ is the risk-free rate of return, SMB τ is a size factor, that is, the difference between the value-weighted portfolio returns of small and large stocks
-
HML τ is a book-to-market factor, that is, the difference between the value-weighted portfolio returns of high book-to-market and low book-to-market stocks
-
UMD τ is a momentum factor, that is, the difference in the returns of stocks with a positive return momentum and those with a negative return momentum over months τ-12 and τ-2.
3.2 Results and discussion
Portfolio | Average monthly abnormal return (%) for the overall groups | ||
---|---|---|---|
Stars | Non-Stars | Difference Stars – Non-Stars | |
Panel A. Year After (November 2003 – May 2014) | |||
Long: Strong Buy/Buy | 0.33***
(4.09) | 0.18*
(1.75) | 0.15**
(2.03) |
Hold | 0.03 (0.45) | −0.07 (−0.73) | 0.10 (1.57) |
Short: Sell/ Strong Sell | −0.20 (−1.56) | −0.29**
(−2.42) | 0.09 (0.78) |
Long-Short | 0.53***
(4.56) | 0.47***
(5.46) | 0.06 (0.56) |
Panel B. Year Before (February 2002 – December 2012) | |||
Long | 0.62***
(7.28) | 0.16 (1.46) | 0.45***
(5.14) |
Hold | 0.01 (0.15) | −0.08 (−0.80) | 0.10 (1.24) |
Short | −0.46***
(−3.44) | −0.24 (−1.62) | −0.22*
(−1.67) |
Long-Short | 1.08***
(9.00) | 0.40***
(3.71) | 0.68***
(5.30) |
Panel C. Difference Year After – Year Before (SUEST TEST) | |||
Long | −0.29***
| 0.02 | – |
Hold | 0.02 | 0.01 | – |
Short | 0.26**
| −0.05 | – |
Long-Short | −0.55***
| 0.07 | – |
Portfolio | Average monthly abnormal returns (%) for the entire groups of star analysts | |||
---|---|---|---|---|
I/I | STM-TEE | STM-TSP | WSJ | |
Panel A. Year After (November 2003 – May 2014) | ||||
Long: Strong Buy/Buy | 0.32***
(3.33) | 0.32***
(3.09) | 0.38***
(3.83) | 0.23***
(2.18) |
Hold | 0.16*
(1.70) | 0.01 (0.10) | -0.02 (−0.24) | -0.02 (−0.21) |
Short: Sell/ Strong Sell | 0.18 (1.12) | -0.64***
(−3.44) | -0.16 (−0.79) | -0.40**
(−2.02) |
Long-Short | 0.14 (0.96) | 0.97***
(5.19) | 0.54***
(2.69) | 0.63***
(3.10) |
Panel B. Year Before (February 2002 – December 2012) | ||||
Long | 0.39***
(3.70) | 0.36***
(3.20) | 0.90***
(8.13) | 0.98***
(8.27) |
Hold | 0.05 (0.48) | 0.05 (0.45) | 0.05 (0.44) | 0.01 (0.11) |
Short | -0.01 (−0.07) | -0.24 (−1.08) | -1.02***
(−5.10) | -1.14***
(−5.66) |
Long-Short | 0.40**
(2.37) | 0.59***
(2.68) | 1.91***
(9.58) | 2.11***
(10.84) |
Panel C. Difference Year After – Year Before (SUEST TEST) | ||||
Long | -0.07 | -0.04 | -0.52***
| -0.75***
|
Hold | 0.11 | -0.04 | -0.07 | -0.03 |
Short | 0.19 | -0.40*
| 0.86***
| 0.74***
|
Long-Short | -0.26*
| 0.38 | -1.37***
| -1.48***
|
Portfolio | Average monthly abnormal returns (%) for number-one ranked star analysts | |||
---|---|---|---|---|
I/I-1 | STM-TEE-1 | STM-TSP-1 | WSJ-1 | |
Panel A. Year After (November 2003 – May 2014) | ||||
Long: Strong Buy/Buy | 0.44***
(3.26) | 0.31**
(2.20) | 0.42***
(3.31) | 0.38**
(2.11) |
Hold | 0.09 (0.66) | -0.17 (−1.31) | 0.02 (0.17) | -0.02 (−0.16) |
Short: Sell/ Strong Sell | -0.27 (−1.14) | -0.70**
(−2.44) | 0.23 (0.59) | -0.20 (−0.46) |
Long-Short | 0.71***
(2.83) | 1.01***
(3.34) | 0.18 (0.46) | 0.58 (1.26) |
Panel B. Year Before (February 2002 – December 2012) | ||||
Long | 0.51***
(3.45) | 0.31*
(1.93) | 0.93***
(5.83) | 1.35***
(6.98) |
Hold | 0.12 (0.81) | 0.19 (1.28) | -0.12 (−0.82) | 0.02 (0.11) |
Short | -0.35 (−1.34) | -0.28 (−0.84) | -0.85***
(−2.78) | -1.90***
(−4.96) |
Long-Short | 0.87***
(2.98) | 0.58*
(1.66) | 1.79***
(5.34) | 3.25***
(7.97) |
Panel C. Difference Year After – Year Before (SUEST TEST) | ||||
Long | -0.07 | 0.00 | -0.51***
| -0.97***
|
Hold | -0.03 | -0.36**
| 0.14 | -0.04 |
Short | 0.08 | -0.42 | 1.08**
| 1.70***
|
Long-Short | -0.16 | 0.43 | -1.61***
| -2.67***
|
Alpha differentials (%) in the Year Before (February 2002 – December 2012) for the groups of analysts | ||||||||
---|---|---|---|---|---|---|---|---|
Non-Stars
| I/I | STM-TEE | STM-TSP | WSJ | I/I-1 | STM-TEE-1 | STM-TSP-1 | |
Panel A. Long portfolios: Strong Buy, Buy recommendations | ||||||||
I/I | 0.23**
| |||||||
STM-TEE | 0.19 | -0.03 | ||||||
STM-TSP | 0.73***
| 0.51***
| 0.54***
| |||||
WSJ | 0.81***
| 0.58***
| 0.62***
| 0.08 | ||||
I/I-1 | 0.35**
| 0.12 | 0.15 | -0.39***
| -0.46***
| |||
STM-TEE-1 | 0.14 | -0.08 | -0.05 | -0.59***
| -0.67***
| -0.20 | ||
STM-TSP-1 | 0.77***
| 0.54***
| 0.57***
| 0.03 | 0.04 | 0.42**
| 0.62***
| |
WSJ-1 | 1.19***
| 0.96***
| 0.99***
| 0.45***
| 0.38***
| 0.84***
| 1.04***
| 0.42**
|
Panel B. Short portfolios: Sell, Strong Sell recommendations | ||||||||
I/I | 0.23 | |||||||
STM-TEE | 0.00 | -0.22 | ||||||
STM-TSP | -0.78***
| -1.00***
| -0.78***
| |||||
WSJ | -0.90***
| -1.13***
| -0.90***
| -0.12 | ||||
I/I-1 | -0.12 | -0.34*
| -0.12 | 0.66**
| 0.78***
| |||
STM-TEE-1 | -0.04 | -0.26 | -0.04 | 0.74**
| 0.86**
| 0.08 | ||
STM-TSP-1 | -0.62**
| -0.84***
| -0.62*
| 0.16 | 0.28 | -0.50 | -0.58 | |
WSJ-1 | -1.66***
| -1.88***
| -1.66***
| -0.88**
| -0.76**
| -1.54***
| -1.62***
| -1.04**
|
Panel C. Long-Short portfolios | ||||||||
I/I | 0.00 | |||||||
STM-TEE | 0.19 | 0.19 | ||||||
STM-TSP | 1.51***
| 1.51***
| 1.32***
| |||||
WSJ | 1.71***
| 1.71***
| 1.52***
| 0.20 | ||||
I/I-1 | 0.47 | 0.46**
| 0.27 | -1.05***
| -1.25***
| |||
STM-TEE-1 | 0.18 | 0.18 | -0.01 | -1.33***
| -1.53***
| -0.28 | ||
STM-TSP-1 | 1.38***
| 1.38***
| 1.19***
| -0.13 | -0.33 | 0.92**
| 1.20***
| |
WSJ-1 | 2.85***
| 2.84***
| 2.65***
| 1.33***
| 1.13***
| 2.38***
| 2.66***
| 1.46***
|
Alpha differentials (%) in the Year After (November 2003 – May 2014) for the groups of analysts | ||||||||
---|---|---|---|---|---|---|---|---|
Non-Stars
| I/I | STM-TEE | STM-TSP | WSJ | I/I-1 | STM-TEE-1 | STM-TSP-1 | |
Panel A. Long portfolios: Strong Buy, Buy recommendations | ||||||||
I/I | 0.15 | |||||||
STM-TEE | 0.15 | 0.00 | ||||||
STM-TSP | 0.21*
| 0.06 | 0.06 | |||||
WSJ | 0.05 | -0.09 | -0.09 | -0.15 | ||||
I/I-1 | 0.26*
| 0.12 | 0.12 | 0.06 | 0.21 | |||
STM-TEE-1 | 0.14 | -0.01 | -0.01 | -0.07 | 0.08 | -0.13 | ||
STM-TSP-1 | 0.24*
| 0.09 | 0.09 | 0.03 | 0.19 | -0.03 | 0.10 | |
WSJ-1 | 0.21 | 0.06 | 0.06 | 0.00 | 0.15 | -0.06 | 0.07 | -0.03 |
Panel B. Short portfolios: Sell, Strong Sell recommendations | ||||||||
I/I | 0.47***
| |||||||
STM-TEE | -0.35**
| -0.82***
| ||||||
STM-TSP | 0.13 | -0.34 | 0.48**
| |||||
WSJ | -0.11 | -0.58***
| 0.24 | -0.24 | ||||
I/I-1 | 0.02 | -0.45**
| 0.37 | -0.11 | 0.13 | |||
STM-TEE-1 | -0.41 | -0.88***
| -0.05 | -0.53*
| -0.29 | -0.43 | ||
STM-TSP-1 | 0.52 | 0.05 | 0.87**
| 0.39 | 0.63 | 0.50 | 0.93**
| |
WSJ-1 | 0.09 | -0.38 | 0.44 | -0.04 | 0.20 | 0.07 | 0.49 | -0.43 |
Panel C. Long-Short portfolios | ||||||||
I/I | -0.32**
| |||||||
STM-TEE | 0.50***
| 0.82***
| ||||||
STM-TSP | 0.08 | 0.40*
| -0.42*
| |||||
WSJ | 0.16 | 0.49**
| -0.34 | 0.09 | ||||
I/I-1 | 0.24 | 0.57***
| -0.26 | 0.17 | 0.08 | |||
STM-TEE-1 | 0.54*
| 0.86***
| 0.04 | 0.47 | 0.38 | 0.30 | ||
STM-TSP-1 | -0.28 | 0.04 | -0.78*
| -0.36 | -0.44 | -0.53 | -0.82*
| |
WSJ-1 | 0.12 | 0.44 | -0.38 | 0.04 | -0.05 | -0.13 | -0.42 | 0.40 |