The Economist Cover : Dollar Edition
Are Cover Stories Effective Contrarian Indicators? Tom Arnold et al
Abstract:
Headlines from featured stories in Business Week, Fortune, and Forbes were collected for a 20-year period to determine whether positive stories are associated with superior future performance and negative stories are associated with inferior future performance for the featured company. “Superior” and “inferior” were determined in comparison with an index or another company in the same industry and of the same size. Statistical testing implied that positive stories generally indicate the end of superior performance and negative news generally indicates the end of poor performance.
December 1st, 2007 at 1:55 pm
The Economist was not included in the study. Yves Smith notes in his story on the same cover that the Economist had a June 2005 story on the housing bubble. It didn’t peak till 2006, at least in the US, and continued into this year in the UK.
Bottom line: the Economist isn’t always wrong, and may again be calling a trend that still has some legs.
December 1st, 2007 at 3:34 pm
No they are not always wrong but they got some pretty spectacular “goofs” as they say.”Drowning in oil” in march 1999 calling for $5.00, 4 days before a bottom in prices not since then or last year in late may “bears in the woods” within 1 or 2% of a bottom in [U.S.] stocks prices and again within a few days of the bottom with DJ around 11000.
They recognize that themselves.
GOOFS : We woz wrong
http://www.economist.com/displaystory.cfm?story_id=268752
If you can’t access it, I will put as a comment, let me know.
December 1st, 2007 at 7:07 pm
I think those cases can’t be seen as write or wrong. There is an important thing to be add to all those negative headlines.
When the managers involved with the stuff read those issues at pubic magazine they know that is time to make some magic.
The credit crunch moment trouble is one clear behavior to exemplify it. There are troubles everywhere in the financial market. There is a lot of bad news everywhere and the central banks around the world are just doing magic. They are putting a lot of money into financial market that used to be out of the normal procedures.
There are some speeches that we can notice the law will not be played. This is the case of Alistar Darling interview about the extra time he intends to help the Northern Rock bank.
After that we use o turn bad news in good news and it isn’t the headlines that was wrong.
December 2nd, 2007 at 1:23 pm
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