Person:

Avery, Christopher

We study the predictive power of approximately 2.5 million stock picks submitted by individual users to the “CAPS” website run by the Motley Fool company (www.caps.fool.com). These picks prove to be surprisingly informative about future stock prices. Indeed, a strategy of shorting stocks with a disproportionate number of negative picks on the site and buying stocks with a disproportionate number of positive picks produces a return of over nine percent per annum over the sample period. These results are mostly driven by the fact that negative picks on the site strongly predict future stock price declines; positive picks on the site produce returns that are statistically indistinguishable from the market. A Fama French decomposition suggests that these results are largely due to stock-picking rather than style factors or market timing.

This paper analyzes a simple model of infectious disease where the incentives for individuals to reduce risks through endogenous social distancing take straightforward cost-benefit form. Since disease is transmitted through social interactions, the threat of spread of infection poses a collective action problem. Policy interventions such as lockdowns, testing, and mask-wearing serve, in part, as substitutes for social distancing. Provision of a vaccination is the only intervention that unambiguously reduces both the peak infection level and the herd immunity level of infection. Adoption of vaccination remains limited in a decentralized equilibrium, with resulting reproductive rate of disease Rt > 1 at the conclusion of vaccination. Vaccine mandates yield increases in vaccination rates and corresponding reductions in future infection rates but do not increase expected payoffs to individuals.

This paper reports the results of a pilot study, using a randomized controlled trial to provide college counseling to high-achieving students from relatively poor families. We followed 107 high school seniors through the college admissions process in 2006-2007; we selected 52 of these students at random, offering them ten hours of individualized college advising with a nearby college counselor. The counseling had little or no effect on college application quality, but does seem to have influenced the choice of where the students applied to college. We estimate that students offered counseling were 7.9 percentage points more likely than students not offered counseling to enroll in colleges ranked by Barron’s as “Most Competitive”, though this effect was not statistically significant. More than one-third of the students who accepted the offer of counseling did not follow through on all of the advice they received. Going beyond the framework of the randomized experiment, our statistical analysis suggests that counseling would have had approximately twice as much effect if all students matched with counselors had followed the advice of the counselors.

We analyze the informational content of more than 1.2 million stock picks provided by more than 60,000 individuals from November 1, 2006 to October 31, 2007 on the CAPS open access website created by the Motley Fool company (www.caps.fool.com). On average, an individual pick in CAPS outperformed the S&P 500 index by 4 percentage points in the twelve months after the pick. We use a four-factor regression framework to estimate the excess returns associated with portfolios that aggregate these picks; a portfolio of the most popular CAPS stocks yielded excess returns of more than 18 percentage points annually relative to the portfolio of the least popular stocks.