Which Are The Most (Least) Accurate Investment Banks? by InterTrader
InterTrader set out to discover just how accurate the big banks stock market predictions really are. Are their ‘hot picks’ all they’re cracked up to be? Their new interactive research piece, Gurudex, puts their predictions to the test to find out which institutions are the most accurate and which achieve the highest returns.
They held the big investment banks to account in two ways:
Accuracy (whether or not the prediction grew/fell in price) and
Growth (the percentage increase/decrease on the investment).
InterTrader sourced the hot stock picks of sixteen top investment banks, including Goldman Sachs, Cantor Fitzgerald, Barclays Capital, JP Morgan and UBS, in 2015. We modelled equal investments in each of their top predictions over the course of a year – holding each pick for either 30 days, 90 days, 180 days, or until the end of the year (four different models).
InterTrader then looked at what would happen if you invested in all the picks by all of these banks – resulting in a combined score for how well the industry can actually predict stock performance.
Overall they found that recommendations were only marginally better than a coin flip. The banks only managed to predict the correct direction their ‘hot picks’ would go 55% of the time – and brought in a gain, over the course of an entire year, of just 0.80%.
In fact, holding their predictions for longer just meant worsening results:
|End of Year||43%||-4.79%|
Ultimately, the longer you hold leading bank ‘hot picks’ the more you could lose. This would suggest that, generally, recommendations from investment banks are better off as short-term investments. Check out the rest of the piece here: