« Common Size Analysis of Total SA
Common Size Analysis of Exxon Mobil »

Are Cover Stories Effective Contrarian Indicators?

Anecdotally, magazine cover stories have been purported contrarian indicators. Most famous, perhaps, is the Business Week “The Death of Equities” cover just before the long bull run of the 1980’s and 1990’s. However, the long-term stock price impact following cover story headlines from major business publications had never been studied academically.

In the March/April 2007 Financial Analysts Journal, Arnold, Earl and North take the issue head on. They collect 20 years of headlines from Business Week, Fortune and Forbes and classify them as positive, negative or neutral. Their statistical tests indicate that positive cover stories typically signal the end of superior performance and that negative headlines typically signal the end of poor performance. However, the evidence does not strongly suggest significant reversal or momentum when factors such as company size are also considered.

For more information, see all articles on: Research

See also:
  • Economic Forecasting Using Leading Indicators
  • Market Structure Indicators
  • Sentiment Indicators
  • Bid-Ask Spreads: Effective versus Quoted
  • Flow of Funds Indicators
    • Technical Analysis Explained : The Successful Investor's Guide to Spotting Investment Trends and Turning Points

    The Intelligent Investor: The Classic Text on Value Investing

    Financial Statement Analysis: A Practitioner's Guide, 3rd Edition

    Managing Investment Portfolios: A Dynamic Process (CFA Institute Investment Series)

    This entry was posted on Monday, May 7th, 2007 at 7:36 am and is filed under Research. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

    6 Responses to “Are Cover Stories Effective Contrarian Indicators?”

    1. The Magazine Cover Indicator - Stock Market Beat - Our beat: The stock market. Our job: Beat it. Says:

      [...] simplistic, the magazine cover indicator now has the support of recent academic research.  This research did find that cover story headlines on Business Week, Fortune and Forbes tended to [...]

      May 12th, 2007 at 4:20 pm

    2. Cover Indicator Update - Stock Market Beat - Our beat: The stock market. Our job: Beat it. Says:

      [...] simplistic, the magazine cover indicator now has the support of recent academic research. This research did find that cover story headlines on Business Week, Fortune and Forbes tended to [...]

      June 9th, 2007 at 8:39 am

    3. Magazine Cover Indicator Update - Stock Market Beat - Our beat: The stock market. Our job: Beat it. Says:

      [...] simplistic, the magazine cover indicator now has the support of recent academic research. This research did find that cover story headlines on Business Week, Fortune and Forbes tended to [...]

      June 16th, 2007 at 7:19 pm

    4. International Business News : Business News, Technology Industry News | Stock Market Beat Says:

      [...] simplistic, the magazine cover indicator now has the support of recent academic research. This research did find that cover story headlines on Business Week, Fortune and Forbes tended to [...]

      July 15th, 2007 at 9:38 am

    5. Magazine Cover Indicator Update | Stock Market Beat Says:

      [...] simplistic, the magazine cover indicator now has the support of recent academic research. This research did find that cover story headlines on Business Week, Fortune and Forbes tended to [...]

      August 4th, 2007 at 7:12 am

    6. Cover Indicator Update | Stock Market Beat Says:

      [...] simplistic, the magazine cover indicator now has the support of recent academic research. This research did find that cover story headlines on Business Week, Fortune and Forbes tended to [...]

      September 15th, 2007 at 6:01 am

    Leave a Reply

    You must be logged in to post a comment.

    « Common Size Analysis of Total SA
    Common Size Analysis of Exxon Mobil »