Publication Type
Journal Article
Version
submittedVersion
Publication Date
9-2010
Abstract
Investors’ reaction to stock recommendations is often incomplete so that there is a predictable post-recommendation drift. I investigate investor inattention as a plausible explanation for this drift by using prior turnover as a proxy for attention. I find that low attention stocks react less to stock recommendations than high attention stocks around the three-day event window. Subsequently, the recommendation drift of firms with low attention is more than double in magnitude when compared to firms with high attention. Similar conclusions are reached with alternative proxies for attention. The evidence supports investor inattention as a source of the stock recommendation drift.
Keywords
Underreaction, Investor Attention, Security Analysts, Stock Recommendations
Discipline
Portfolio and Security Analysis
Research Areas
Finance
Publication
Financial Management
Volume
39
Issue
3
First Page
1223
Last Page
1252
ISSN
1755-053X
Identifier
10.1111/j.1755-053X.2010.01110.
Publisher
Wiley
Citation
LOH, Roger.
Investor inattention and the underreaction to stock recommendations. (2010). Financial Management. 39, (3), 1223-1252.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/3031
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1089773