Meet Markets: Investor Meetings and Expected Returns

Abstract

We show meetings of investors and firms convey information about expected returns. Investors frequently travel to meet in-person with firms before investing, and we show firms with abnormally frequent meetings predictably outperform firms with abnormally infrequent meetings by roughly 70-to-100 basis points per month. Abnormally frequent meetings also predict improvements in firms’ fundamental performance, suggesting our results stem from investors allocating time and attention to meetings with management from underpriced firms. Together, our findings highlight the usefulness of investors’ resource allocation decisions in expected return estimations, and provide insights into the multi-stage process investors undertake when forming portfolios.

Keywords: Investor meeting, Information arbitrage, Expected returns, Return predictability

JEL Classification: G10, G11, G12, G14, M40, M41