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Liquidity issues surrounding neglected firms
Investment management and financial innovations (2008)
  • William J. Bertin, Bond University
  • David Michayluk
  • Laurie Prather, Bond University
The neglected firm effect is the phenomenon where stocks of less widely-known firms have larger returns than that predicted by asset pricing models. Researchers have found mitigating variables, such as the price of the stock, that have partially explained the performance of neglected firms. Neglect and price may be proxies for the liquidity of each firm's stock, and the higher observed returns may actually be a premium for the lack of liquidity. This paper compares two definitions of neglect and their relationship with liquidity. When neglect is measured by the number of analysts following a stock, more analysts are associated with higher liquidity for the stock. An even stronger relationship is observed when the proxy for neglect is widely disseminated earnings announcements. These results are confirmed in regression analyses that control for the stock price.
  • neglected firm,
  • market microstructure,
  • earnings announcements,
  • analyst following
Publication Date
January 1, 2008
Publisher Statement
Interim status: Citation only.

Bertin, W.J., Michayluk, D. & Prather, L. (2008). Liquidity issues surrounding neglected firms. Investment management and financial innovations, 5(1), 57-65.

Access the publisher's website.

2008 HERDC submission. FoR Code: 1502

© Copyright William J. Bertin, David Michayluk, Laurie Prather, 2008
Citation Information
William J. Bertin, David Michayluk and Laurie Prather. "Liquidity issues surrounding neglected firms" Investment management and financial innovations Vol. 5 Iss. 1 (2008)
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