Copying all stock picks of top-ranked analysts
What's inherently wrong with having a strategy of JUST copying ALL stock picks (buy, hold, sell) of the top ranked analyst/ analysts on Institutional Investor or some other league table?
Obviously, I KNOW this is a recipe for disaster, and I know the point of ranking analysts isn't to copy their calls but to know which analysts add value (for buysiders), but I'd find it interesting (and maybe useful) to flesh out the assumptions of the hypothesis and use it as a thoughtful starting point, to evaluate the nature of the ER profession. Same way how we know markets aren't strong-form efficient, but we still find tremendous value in fleshing out the EMH, and then relaxing the assumptions of the hypothesis and then working from there (by basing every thesis on why do we think this particular call hasn't been priced in yet and is inefficient, for example)
Analysts publish their calls because they genuinely believe in their call. If following all the calls leads to loss, what's the theory behind ranking analysts. We already know PM rankings are useless, and PMs have more or less an equal chance of staying in top bucket as they are to slip into bottom bucket next year
markets are clearly inefficient, but that doesn't mean top II-ranked analysts can outperform benchmarks/indices they are effectively valued as = (number of interactions with buy-side clients) * (popularity/campaigning/value-added)
first variable is heavily influenced by the firm they work at & second is influenced by years in the industry/whether the firm cares about II votes/how good of a stock picker they are
great insight - that was the sort of answer I was hoping for. So essentially it's more of a clout ranking than a stockpicker ranking.
Initially MS'd for your pre-edit answer that EMH doesn't need to be fleshed out.
Surely to god this has been done… if it was so good, peiple would talk about it. Or am I missing something?
Following that train of thought, that leads to the typical efficiency cycle of arbing out profits in investing. If it's good, people talk about it, everyone rushes into it, all profit gets competed away, people don't talk about it anymore, it becomes good again, ..... rinse and repeat.
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