Do Brokerage House Recommendations Add Value?

Abstract

The author examines the recommendations made during the 1990s on stock selection and asset allocation, as published in two Wall Street Journal quarterly articles. Brokerage houses cannot add value in stock selection in the short term (one year or less) but they do over the long term (five years). Asset allocation recommendations do add value over the short term but not the long term. Although some brokerage houses generate consistent relative performance across stock selection and asset allocation over time, the correlation of the relative rankings of the brokerage houses as a group is negative.