What Makes Stock Prices Move? Fundamentals vs. Investor Recognition
Posted: 26 Mar 2012
Date Written: March 26, 2012
The authors synthesized and extended recent research demonstrating that investor recognition is a distinct, 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, companies time their financing and investing decisions to exploit changes in investor recognition. Investor recognition dominates stock price movements over short horizons, whereas fundamentals dominate over longer horizons.
Keywords: Equity Investments, Equity Market Valuation and Return Analysis, Fundamental Analysis (Sector, Industry, Company) and the Valuation of Individual Equity Securities, Portfolio Management, Equity Portfolio Management Strategies
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