R software used to test Cramer

Discussion in 'Educational Resources' started by nitro, Aug 27, 2007.

  1. nitro


    I found this interesting. It was a post to the R list.

    I don't know how scientific the analysis is, but the methodology seems reasonable.

    Hey list !

    Esteemed list-member Pat Burns helped the stock market tabloid Barron's
    do a cover story last week that tested the returns to the stock picks
    that Jim Cramer makes on his CNBC show Mad Money. I think the story is
    accessible without subscription at our website www.barrons.com, but I'll
    send copies to anyone who cares and can't find it. Since today's
    Saturday, it's now the past week's edition.

    We used R to test various investment strategies, such as buying the
    morning after Cramer's 6 pm show, buying on the second day after the
    show, etc. One reason we kept testing new strategies is that Cramer and
    CNBC kept shifting their claim about when Cramer advises his audience to
    Buy, as we showed them how each successive strategy lagged the market.
    They also made weasely arguments that you should only count certain of
    his recommendations -- as if viewers would know that his fingers are
    crossed some of the times that he tells you to Buy or Sell. As it
    happened, the segment of his show that he argued most shrilly for us to
    deselect (his Lightning Round recommendations to phone callers) was the
    only segment with statistically significant good excess returns -- in
    this case, on the Sell recommendations. His prepared Sell
    recommendations went up.

    We did find that you might make an interesting 20-day return by shorting
    his Buys the morning after his shows, with offsetting S&P500 positions.

    We downloaded our stock histories from Edgar Online's I-Metrix service,
    using some Excel macros cooked up by Edgar Online analyst Elias-John
    Kies and my neighbor Madison Mcgaffin, who's a rising sophomore at
    Tufts. My story credits to them got cut in the editing.

    Pat bootstrapped our 95% confidence intervals. We also did some event
    study style analyses, incorporating each stock's average return over its
    prior 250 days. These suggest that Cramer is a momentum guy who probably
    rips his ideas from the headlines.

    Very few statistical details made it into the final story. Nor did my
    appreciative credit to Tim Hesterberg, of Insightful in Seattle, who
    gave us some good advice but who bears no responsibility for any
    woebegone errors.

    Hey Pat ! Feel free to correct any misreporting done here by this
    misanthropic layman reporter.

    Bill Alpert
  2. nitro


  3. empee


    even more interesting is this article was published shortly after WSJ which owns Barrons was bought by News Corp, which is launching a competing channel to CNBC, where Cramer rants. Coincidence? Hopefully.