TY  - JOUR
AU  - Graham,John R.
AU  - Harvey,Campbell R.
TI  - Market Timing Ability and Volatility Implied in Investment Newletters'  Asset Allocation Recommendations
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 4890
PY  - 1997
Y2  - June 1997
UR  - http://www.nber.org/papers/w4890
L1  - http://www.nber.org/papers/w4890.pdf
N1  - Author contact info:
John Graham
Duke University
Fuqua School of Business
100 Fuqua Drive
Durham, NC 27708-0120
Tel: 919/660-7857
Fax: 919/660-8038
E-Mail: john.graham@duke.edu

Campbell R. Harvey
Duke University
Fuqua School of Business
Durham, NC 27708-0120
Tel: 919/660-7768
Fax: 919/660-8030
E-Mail: cam.harvey@duke.edu
M2  - featured in NBER digest on 1995-04-01
AB  - We analyze the advice contained in a sample of 237 investment letters over the 1980-1992 period.  Each newsletter recommends a mix of equity and cash.  We construct portfolios based on these recommendations and find that only a small number of the newsletters appear to have higher average returns than a buy-and-hold portfolio constructed to have the same variance.  Knowledge of the asset allocation weights also implies knowledge of the exact conditional betas.  As a result, we present direct tests of market timing ability that bypass beta estimation problems.  Assuming that different letters cater to investors with different risk aversions, we are able to imply the newsletters' forecasted market returns.  The dispersion of the newsletters' forecasts provides a natural measure of disagreement in the market.  We find that the degree of disagreement contains information about both market volatility and trading activity.
ER  -