Are stocks dumped or neglected by analysts' inferior investments to covered stocks?

Lee, Hei Wai; Sharma, Vivek; Cai, Kelly Nianyun

doi:10.1016/j.jbusres.2010.04.005

Cited by 7 publications

(2 citation statements)

References 29 publications

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“…Based on the obtained results, the authors conclude that the neglected firm effect does not exist on the Istanbul Stock Exchange. On the other hand, the study by Lee et al (2011) gives evidence in favour of the neglected firm effect. The study shows that uncovered stocks make monthly by 0.46%, i.e.…”

Section: Semi-strong-form Market Efficiency Testsmentioning

confidence: 95%

Evidence for and Against the Validity of Efficient Market Hypothesis

Leković

2018

Economic Themes

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The concept of an efficient financial market, in literature known as efficient market hypothesis (EMH), has had a long and difficult development path from the idea itself to its final conception, as one of the central paradigms in modern finance. It has been tested and critically reviewed for decades, and the two basic types of problems it has encountered are theoretical paradoxes and market anomalies. The aim of the paper is to examine the validity of EMH through various financial market efficiency tests and the results of previous research. The intention is to answer the question of whether, despite theoretical paradoxes and market anomalies, the notion of validity can be attributed to the concept of an efficient financial market. In this regard, the paper presents plenty of evidence for and against the validity of weak, semi-strong, and strong form of EMH, to conclude that, even after more than half a century of research, financial literature has not reached a consensus on the presence or absence of the validity of this hypothesis.

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Section: Semi-strong-form Market Efficiency Testsmentioning

confidence: 95%

Evidence for and Against the Validity of Efficient Market Hypothesis

Leković

2018

Economic Themes

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“…But contradicting to theory neglected firm monthly abnormal return was found to be -1% which clearly states that there is no neglected firm effect in Istanbul stock exchange. Lee, Sharma and Cai (2010) suggests that the stocks that are not recommended by analysts tend to outperform the stocks that the analysts recommend. The higher returns earned by investors of dumped stocks is recompense for greater search cost and the higher risk linked with these stocks.…”

Section: Literature Reviewmentioning

confidence: 99%

Neglected Firm Effect and Stylized Equity Returns: Evidence from Pakistan

Akhter

Butt

Chaudhary

et al. 2015

ILSHS

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The neglected stock effect is the phenomenon where less researched stock earns more return than that predicted by the traditional CAPM. The aim of this study is to reveal the bonding between neglected stock premium and equity returns in the stock market of Pakistan by using Fama andFrench (1992 & 1993) methodology. This study is unique with respect to Pakistan that checks the relationship among neglected stock premium and equity returns on a sample of 200 stocks listed the largest stock market of Pakistan KSE. It is corroborated that neglected firm effect is present in market and priced by the market. This manifests that those stocks which are neglected, less researched and got less analyst coverage earn higher return in comparison to popular stocks that got more analyst coverage. The results also revealed that two factor model has greater explanatory power in comparison to Traditional CAPM. The results of this study are in line with the findings of Arbel and Strebel (1980) and Bertin, Michayluk and Prather (2008) for the USA equity market. Lower research analyst coverage increases the uncertainty for investor that how the company will perform in the future, which ultimately increase the risk factor and so the demand of return from the investors. The decision makers must consider this anomaly while making decisions regarding financing, investing etc. This study will facilitate the investors in taking effective investment decision and for efficient resource allocation.

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