Holding Analysts Accountable for Stock Recommendations
8/7/2014 11:30:26 AM
Johnson Finance Professor Roni Michaely gets behind TipRanks, an Israeli start-up that tracks the records of experts, who provide financial advice to investors
TipRanks, a financial accountability website, has closed a $3-million round of investing, helped by the support—and advice—of Roni Michaely, the Rudd Family Professor of Management and professor of finance at Johnson at Cornell University. Starting in 2012, Michaely helped TipRanks build its platform and analysts’ ranking system. Recently he was joined in his backing of TipRanks by other high-profile investors, including former New York State Governor Elliot Spitzer, whom the press nicknamed the “Sheriff of Wall Street” for pursuing corrupt financiers, when he was attorney general of New York.
TipRanks uses machine learning and natural language processing algorithms (NLP) to search the internet and measure the performance of anyone giving investment advice on leading financial blogs and websites. The result: investors can see the track record of anyone publishing investment advice, such as the expert’s overall success rate and average return, as well as successful advice on specific stocks.
The web site’s aim fits well with the research interests of Michaely, which often touch on the role of transparency in corporate financial practice and governance, as well as the intersection of technology and finance. He will be teaching the entrepreneurial finance course for students in the Johnson Cornell Tech MBA program in spring 2015 at the Cornell Tech campus in New York City. Michaely and TipRanks are making the site available to students across all of Johnson’s five MBA programs for three months, at no charge. (Students can e-mail TipRanks for login credentials.)
“Tipranks enables individual investors to make better investment decisions and avoid the mistake of listening to unsound or advice or advice that lacks credibility,” Michaely said. Independently, it also enables institutions to reliably track the quality and usefulness of analysts’ recommendations, with a platform that is geared toward hedge funds and larger-scale investment strategies, he said.
TipRanks was founded in June of 2012 with $700,000 seed money by Uri Gruenbaum, CEO, and Gilad Gat, CTO, as a resource for investors. The founders realized that there is a need for a data-driven financial accountability tool that will allow investors to see who is worth listening to and who isn’t. TipRanks launched the beta version of its website on July 22, 2014.
“It is very exciting to help Uri and Gilad in developing their disruptive vision, which is consistent with what much of my own research in the last 20 years,” Michaely said. “TipRanks’ platform is a significant advancement in furthering transparency in an important segment of the marketplace.”
The start-up’s launch and its high-profile investors led to media buzz and coverage in numerous outlets, including the New York Post, New York Daily News, Yahoo! Finance, New York Times, CNBC, and Wall Street Journal Marketwatch.