Evaluating The Performance Of Jim Cramer's Stock Picks

Open Access
Sandler, Jeffrey Michael
Area of Honors:
Bachelor of Science
Document Type:
Thesis Supervisors:
  • James Alan Miles, Thesis Supervisor
  • James Alan Miles, Honors Advisor
  • Timothy T Simin, Faculty Reader
  • Jim Cramer
  • Stock Picking
  • Efficient Market Hypothesis
  • Random Walk
The art of stock picking is a time-honored tradition in Finance. At any time throughout the history of the markets, you can find at least one example of someone who claims he knows how to beat the markets and make the individual investor money. However, in this modern age of technology, it seems there is now more stock picking “experts” than ever. And with nearly everyone investing their savings and 401k plans in stocks and bonds, the consequences of following bad advice have grown higher than ever before. Which bears the question, “How do these investors know if the advice they are getting is good?” There seems to serious lack of credibility with many of these sources, as well as a lack of verified success. Many stock-pickers tout a big score they’ve recently had, but how many have independently verified histories of their stock picks available? For example, does anybody know if the Motley Fool’s picks outperform the market on average? What about on a risk-adjusted basis? And what about the biggest name in stock-picking today: Jim Cramer. Does the host of Mad Money actually outperform the market in the short-term? How about in the long-term? Is Jim Cramer so big that his picks can have an effect on the price of a stock within 1 day of a recommendation?