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The First Analyst Coverage of Neglected Stocks


  • Cem Demiroglu
  • Michael Ryngaert


"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.

Suggested Citation

  • Cem Demiroglu & Michael Ryngaert, 2010. "The First Analyst Coverage of Neglected Stocks," Financial Management, Financial Management Association International, vol. 39(2), pages 555-584, June.
  • Handle: RePEc:bla:finmgt:v:39:y:2010:i:2:p:555-584

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    Cited by:

    1. Hansen, Robert S., 2015. "What is the value of sell-side analysts? Evidence from coverage changes – A discussion," Journal of Accounting and Economics, Elsevier, vol. 60(2), pages 58-64.
    2. Li, Kevin K. & You, Haifeng, 2015. "What is the value of sell-side analysts? Evidence from coverage initiations and terminations," Journal of Accounting and Economics, Elsevier, vol. 60(2), pages 141-160.
    3. Pei Peter Lung & Pisun Xu, 2014. "Tipping and Option Trading," Financial Management, Financial Management Association International, vol. 43(3), pages 671-701, September.
    4. 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.
    5. Liu, Xiaoding & Ritter, Jay R., 2011. "Local underwriter oligopolies and IPO underpricing," Journal of Financial Economics, Elsevier, vol. 102(3), pages 579-601.
    6. repec:uts:finphd:34 is not listed on IDEAS
    7. 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.

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