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Does Investor Recognition Predict Excess Returns?


Andriy Bodnaruk


University of Notre Dame - Mendoza College of Business

Per Östberg


University of Zurich - Department of Banking and Finance; Swiss Finance Institute
February 2005

AFA 2006 Boston Meetings Paper

Abstract:     
We test Merton's (1987) hypothesis using individual level stockholdings of Swedish investors. Controlling for size and other factors, we find that lower levels of investor recognition lead to greater future excess returns. Positive (negative) changes in investor recognition are followed by lower (higher) excess returns. The effect of investor recognition is more pronounced for young firms. We demonstrate that investor recognition risk is conditionally priced.

Keywords: Investor recognition, Limited stock market participation, Incomplete information, Asset Pricing

JEL Classification: G11, G12

working papers series


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Date posted: March 23, 2005  

Suggested Citation

Bodnaruk, Andriy and Östberg, Per, Does Investor Recognition Predict Excess Returns? (February 2005). AFA 2006 Boston Meetings Paper. Available at SSRN: http://ssrn.com/abstract=686380 or http://dx.doi.org/10.2139/ssrn.686380

Contact Information

Andriy Bodnaruk (Contact Author)
University of Notre Dame - Mendoza College of Business ( email )
Notre Dame, IN 46556-5646
United States
Per Östberg
University of Zurich - Department of Banking and Finance ( email )
Plattenstrasse 14
CH-8032 Zurich, Zurich 8032
Switzerland
+41 44 6342956 (Phone)
Swiss Finance Institute ( email )
c/o University of Geneve
40, Bd du Pont-d'Arve
1211 Geneva, CH-6900
Switzerland
Feedback to SSRN (Beta)


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