A Financial Analysts' Journal academic study conducted by three University of Richmond professors concludes that periods marked by overly negative financial cover stories are followed by an end to poor performance and those marked by overly positive cover stories are an indication of the end of superior performance.
This is a great piece that gets to the heart of the classic "death of equities" and other contrarian indicator front page stories. The study covered 20 years worth of cover stories from BusinessWeek, Fortune, and Forbes Magazines.
The classic BusinessWeek, "Death of Equities" Cover
Cover art courtesy of The Economist, May 29th 2008 issue
Last year, The Economist ran this cover about Crude Oil's record prices.
Abstract (CFA Institute Publications):
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. āSuperiorā and āinferiorā 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.
Click here to download a PDF of the article. (You'll find the link to it in the right-hand column of the page)
(h/t: SimoleonSense.com)
