37 Pages Posted: 17 Feb 2011 Last revised: 23 Apr 2014
Date Written: February 16, 2011
We synthesize and extend recent research demonstrating that investor recognition is a distinct and significant determinant of stock price movements. Realized stock returns are strongly positively related to changes in investor recognition and expected returns are strongly negatively related to the level of investor recognition. Moreover, firms time their financing and investing decisions to exploit changes in investor recognition. Investor recognition dominates stock price movements over short horizons (e.g., one quarter), while fundamentals dominate over longer horizons (e.g., five years).
Keywords: stock returns, fundamental analysis, investor recognition
JEL Classification: G12, G14, M41
Suggested Citation: Suggested Citation
Richardson, Scott A. and Sloan, Richard G. and You, Haifeng, What Makes Stock Prices Move? Fundamentals vs. Investor Recognition (February 16, 2011). Available at SSRN: https://ssrn.com/abstract=1762376 or http://dx.doi.org/10.2139/ssrn.1762376