The Economic Value of Stock Recommendation: Evidence from An Online Stock Advice Platform

Stock recommendations are often questioned in terms of their economic value added. This thesis investigates the economic value of stock recommendations using data from a dutch investment platform. Previous research has shown that at least in the short-run there are significant abnormal returns, however, in the long-run there remains disagreement amongst academics. The purpose of this research is to establish whether these stock recommendations add economic value, tested in the Dutch market using recommendations from an online investment platform. The main findings of this paper suggest that there is no economic value added. I find evidence for a positive abnormal return by testing for the cumulative average return and the abnormal return on the event day itself. However, this positive return can not be monetized using a trading strategy. The return of such a strategy is not significantly positive after adjusting for the market risk and would require a great amount of trading, which combined with trading cost would diminish any returns left.