Facebook for Finance

An Institutional Investor article about investment blogs quotes Wesley Gray, Ph.D., assistant professor of finance at LeBow College of Business. Gray has studied the investment write-ups posted to Value Investors Club, whose founders, Joel Greenblatt and John Petry — longtime partners at New York hedge fund firm Gotham Capital — strictly enforce the 250-member cap. His analysis, which formed the basis of his Ph.D. dissertation at the University of Chicago Booth School of Business, found that stocks recommended on the site delivered an average one-year buy-and-hold return of 9.52 percentage points above the predicted return, after controlling for risk. Gray and his colleagues performed a similar, unpublished analysis of recommendations on the SumZero website, which has a much larger user base and a shorter track record, and found no statistical evidence that the ideas posted there were, on average, market-beating.