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Bridge over ocean
1 September 1997 Financial Analysts Journal Volume 53, Issue 5

Is There a Neglected-Firm Effect?

  1. Craig G. Beard
  2. Richard W. Sias

The “neglected-firm effect” suggests that securities that analysts ignore offer higher returns (a “neglect premium”) than securities that analysts follow and scrutinize heavily. Using a large and recent sample of securities, we reinvestigated the neglected-firm effect. Controlling for capitalization, we found no evidence of a neglect premium. Investors attempting to exploit the neglected-firm effect during the past 14 years are likely to have been disappointed.

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