44 Pages Posted: 12 Oct 2005
Date Written: October 10, 2005
We analyze the relation between investor recognition and stock returns. Consistent with Merton's (1987) theoretical analysis, we show that (i) contemporaneous stock returns are positively related to changes in investor recognition, (ii) future stock returns are negatively related to changes in investor recognition, (iii) the above relations are stronger for stocks with greater idiosyncratic risk and (iv) corporate investment and financing activities are both positively related to changes in investor recognition. Our results indicate that investor recognition is an important determinant of both stock returns and real corporate activity.
Keywords: Investor Recognition, Stock Returns, Asset Pricing
JEL Classification: G12, G14, G31, G32
Suggested Citation: Suggested Citation
Lehavy, Reuven and Sloan, Richard G., Investor Recognition and Stock Returns (October 10, 2005). Ross School of Business Paper No. 1021. Available at SSRN: https://ssrn.com/abstract=817066 or http://dx.doi.org/10.2139/ssrn.817066
By Lu Zhang