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The First Analyst Coverage of Neglected Stocks

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  • Cem Demiroglu
  • Michael Ryngaert

Abstract

"We examine the first analyst coverage of 549 "neglected" stocks that publicly traded at least one year without research coverage. The stocks experience a +4.86% abnormal return at initiation announcement. Positive returns are driven by positive coverage and not the mere introduction of coverage. Initiations from investment banks elicit lower announcement returns if the bank had a prior business relationship with the covered firm. Research firms paid by the covered company to provide coverage elicit announcement returns that are not significantly different from other analysts. Announcement returns are also influenced by liquidity increases and factors consistent with downward-sloping demand curves." Copyright (c) 2010 Financial Management Association International.

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Bibliographic Info

Article provided by Financial Management Association International in its journal Financial Management.

Volume (Year): 39 (2010)
Issue (Month): 2 (06)
Pages: 555-584

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Handle: RePEc:bla:finmgt:v:39:y:2010:i:2:p:555-584

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Cited by:
  1. Carole Comerton‐Forde & David R. Gallagher & Joyce Lai & Terry Walter, 2011. "Broker recommendations and Australian small‐cap equity fund management," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 51(4), pages 893-922, December.
  2. Kovner, Anna, 2012. "Do underwriters matter? The impact of the near failure of an equity underwriter," Journal of Financial Intermediation, Elsevier, vol. 21(3), pages 507-529.
  3. Liu, Xiaoding & Ritter, Jay R., 2011. "Local underwriter oligopolies and IPO underpricing," Journal of Financial Economics, Elsevier, vol. 102(3), pages 579-601.

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