Does investor recognition matter for asset pricing?

Burcu Hacibedel

Emerging Markets Review, 2014, vol. 21, issue C, 1-20

Abstract: In a world of market imperfections, what matters for asset prices differs from theory predictions based on perfect markets and information. In this paper, using a market setting where information costs are more pronounced, I show that the level of investor recognition/awareness matters for asset prices as predicted by Merton (1987). Using a novel dataset, I study the price effects of inclusions to and exclusions from a benchmark equity index in the context of emerging market assets. While testing for a number of existing hypotheses, I am able to document evidence for the ‘investor recognition’ hypothesis, using event study methodology. Furthermore, by making use of analysts' recommendations data, I show that there is a significant increase in coverage for the included stocks. This is also significantly related to the observed price change.

Keywords: Index inclusion; Investor recognition; Emerging markets (search for similar items in EconPapers)
JEL-codes: G11 G14 G15 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1566014114000417
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:21:y:2014:i:c:p:1-20

DOI: 10.1016/j.ememar.2014.07.002

Access Statistics for this article

Emerging Markets Review is currently edited by Jonathan A. Batten

More articles in Emerging Markets Review from Elsevier
Bibliographic data for series maintained by Catherine Liu ().