On a Risk-Adjusted Basis, Do Firms Featured on Business Magazine Covers Make Good Contrarian Investments?

Abstract

Firms featured in cover stories collected from Business Week, Fortune, and Forbes over a 20-year period (1983–2002) are examined to determine whether risk-adjusted contrarian performance in the stock price occurs after the publication of the story. Positive cover stories lead to abnormally low performance in stock price on a risk-adjusted basis, although the returns are still positive. Negative cover stories lead to positive returns on the stock,but the returns are still not superior on a risk-adjusted basis.