A handout photo shows the cover image of Time magazine's December 28, 2009/January 4, 2010 double issue. The magazine named United States Federal Reserve Chairman Ben Bernanke the 2009 Person of the Year. The cover image was by Artist Mark Summers.
Want to quickly derail your business? Get tabbed as the cover story for a major magazine.
Take Amazon's (AMZN.O) Jeff Bezos, who was named Time magazine's Person of the Year in December 1999.
At the time it made sense. It certainly felt like Bezos was doing something important at Amazon. The company's stock was trading near an all-time high of $113 per share. But in less than a year following this cover story, the stock, along with the rest of the Internet bubble world, would collapse by 95%. It would take nearly 10 full years for those losses to be recouped.
If it seems magazine covers have a long history of steering investors the wrong way, then it's probably because they really do. In 2007, three professors at the University of Richmond proved it. In their study, "Are Cover Stories Effective Contrarian Indicators?", the researchers looked at companies featured on the covers of three business magazines, Business Week, Fortune, and Forbes, over the course of 20 years. Their study found a statistically significant correlation between appearance on the cover of one of the magazines and the subsequent performance of the company's stock.
Unfortunately for the companies, the correlation was inversely related to positive magazine covers.
Is now a good time to buy a house?
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- Yes, prices will continue to rise.
- No, Canada is facing a housing bubble and prices will eventually fall.
- I don't know.