Crowdsourcing, the collective wisdom of the crowds, has been show to have strong correlation to future results specifically in sporting events and election polling. Here’s how Tradestreaming addresses crowdsourcing.
Given the fact that academia stuck to its guns for SO long with the Efficient Market Hypothesis (that all information is embedded currently into a stock prices, making it really hard to ‘beat’ the markets), we’re just seeing relatively new research that is open to crowdsourcing investment ideas and some that finds that there is MAJOR outperformance.
For example, check out the Harvard Kennedy School’s “The CAPS Prediction System and Stock Market Returns” paper that studied results of the Motley Fool’s crowdsourcing CAPS platform. Specifically, the paper looked at the difference in returns between the most highly rated stocks and the lowest rated stocks. The paper found huge double-digit outperformance (18%).
3 ways to crowdsource investment ideas now
- Piqqem: This site allows users to rate stocks on a 5 factor scale. More importantly, Piqqem has a portfolio tool that enables users to create and backtest strategies based on the changes in investor sentiment for individual stocks. Check it out.
- Motley Fool CAPS: The subject of the paper above, CAPS has evolved into the Fool’s flagship product. Check out the highest and lowest rated stocks in the CAPS community in the Top Ten Lists.
- Intrade: The mother of all prediction markets, Intrade does huge business in sports betting but also has contracts on financial outcomes. Intrade wagerers buy and sell probability contracts on Dow Jones and S&P predictions.
Source: “The CAPS Prediction System and Stock Market Returns” (Harvard Kennedy School)