Expertise in investment analysis: Fact or fiction

Past research, both theoretical and applied, has discounted the ability of individuals to accurately forecast security prices. Fama′s (1970, 1976) theoretical work on capital market efficiency, and the empirical studies of Stael von Holstein (1972) and Yates, McDaniel, and Brown (1991), suggests that even “experts” cannot perform any better than simple mechanical forecasting methods or the random throw of darts at the stock page. We provide evidence, garnered from a popular Wall Street Journal column, that security market “experts” do in fact outperform both market averages and randomly thrown darts. However, no class of expert can be shown to consistently outperform other experts.