Investor recognition and stock returns

  title={Investor recognition and stock returns},
  author={Reuven Lehavy and Richard E G Sloan},
It is well established that investment fundamentals, such as earnings and cash flows, can explain only a small proportion of the variation in stock returns. We find that investor recognition of a firm’s stock can explain relatively more of the variation in stock returns. Consistent with Merton’s (J Finance 42(3):483–510, 1987) theoretical analysis, we show that (i) contemporaneous stock returns are positively related to changes in investor recognition, (ii) future stock returns are negatively… CONTINUE READING
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