Liquidity issues surrounding neglected firms

William J. Bertin, David Michayluk, Laurie Prather

Research output: Contribution to journalArticleResearchpeer-review

1 Citation (Scopus)

Abstract

The neglected firm effect is the phenomenon where stocks of less widely-known firms have larger returns than that predicted by asset pricing models. Researchers have found mitigating variables, such as the price of the stock, that have partially explained the performance of neglected firms. Neglect and price may be proxies for the liquidity of each firm's stock, and the higher observed returns may actually be a premium for the lack of liquidity. This paper compares two definitions of neglect and their relationship with liquidity. When neglect is measured by the number of analysts following a stock, more analysts are associated with higher liquidity for the stock. An even stronger relationship is observed when the proxy for neglect is widely disseminated earnings announcements. These results are confirmed in regression analyses that control for the stock price.

Original languageEnglish
Pages (from-to)57-65
Number of pages9
JournalInvestment Management and Financial Innovations
Volume5
Issue number1
Publication statusPublished - 2008

Fingerprint

Liquidity
Neglect
Stock prices
Analyst following
Analysts
Premium
Earnings announcements
Firm effects
Asset pricing models

Cite this

Bertin, W. J., Michayluk, D., & Prather, L. (2008). Liquidity issues surrounding neglected firms. Investment Management and Financial Innovations, 5(1), 57-65.
Bertin, William J. ; Michayluk, David ; Prather, Laurie. / Liquidity issues surrounding neglected firms. In: Investment Management and Financial Innovations. 2008 ; Vol. 5, No. 1. pp. 57-65.
@article{df1e3be12f9748f8bb6627f2d4820291,
title = "Liquidity issues surrounding neglected firms",
abstract = "The neglected firm effect is the phenomenon where stocks of less widely-known firms have larger returns than that predicted by asset pricing models. Researchers have found mitigating variables, such as the price of the stock, that have partially explained the performance of neglected firms. Neglect and price may be proxies for the liquidity of each firm's stock, and the higher observed returns may actually be a premium for the lack of liquidity. This paper compares two definitions of neglect and their relationship with liquidity. When neglect is measured by the number of analysts following a stock, more analysts are associated with higher liquidity for the stock. An even stronger relationship is observed when the proxy for neglect is widely disseminated earnings announcements. These results are confirmed in regression analyses that control for the stock price.",
author = "Bertin, {William J.} and David Michayluk and Laurie Prather",
year = "2008",
language = "English",
volume = "5",
pages = "57--65",
journal = "Investment Management and Financial Innovations",
issn = "1810-4967",
publisher = "Business Perspectives",
number = "1",

}

Bertin, WJ, Michayluk, D & Prather, L 2008, 'Liquidity issues surrounding neglected firms' Investment Management and Financial Innovations, vol. 5, no. 1, pp. 57-65.

Liquidity issues surrounding neglected firms. / Bertin, William J.; Michayluk, David; Prather, Laurie.

In: Investment Management and Financial Innovations, Vol. 5, No. 1, 2008, p. 57-65.

Research output: Contribution to journalArticleResearchpeer-review

TY - JOUR

T1 - Liquidity issues surrounding neglected firms

AU - Bertin, William J.

AU - Michayluk, David

AU - Prather, Laurie

PY - 2008

Y1 - 2008

N2 - The neglected firm effect is the phenomenon where stocks of less widely-known firms have larger returns than that predicted by asset pricing models. Researchers have found mitigating variables, such as the price of the stock, that have partially explained the performance of neglected firms. Neglect and price may be proxies for the liquidity of each firm's stock, and the higher observed returns may actually be a premium for the lack of liquidity. This paper compares two definitions of neglect and their relationship with liquidity. When neglect is measured by the number of analysts following a stock, more analysts are associated with higher liquidity for the stock. An even stronger relationship is observed when the proxy for neglect is widely disseminated earnings announcements. These results are confirmed in regression analyses that control for the stock price.

AB - The neglected firm effect is the phenomenon where stocks of less widely-known firms have larger returns than that predicted by asset pricing models. Researchers have found mitigating variables, such as the price of the stock, that have partially explained the performance of neglected firms. Neglect and price may be proxies for the liquidity of each firm's stock, and the higher observed returns may actually be a premium for the lack of liquidity. This paper compares two definitions of neglect and their relationship with liquidity. When neglect is measured by the number of analysts following a stock, more analysts are associated with higher liquidity for the stock. An even stronger relationship is observed when the proxy for neglect is widely disseminated earnings announcements. These results are confirmed in regression analyses that control for the stock price.

UR - http://www.scopus.com/inward/record.url?scp=84891859163&partnerID=8YFLogxK

M3 - Article

VL - 5

SP - 57

EP - 65

JO - Investment Management and Financial Innovations

JF - Investment Management and Financial Innovations

SN - 1810-4967

IS - 1

ER -