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A dynamic analysis of the neglected firm effect

Andrikopoulos, Athanasios; Zheng, Min


Min Zheng


This study uses rolling regressions with panel data and conducts a dynamic analysis of the neglected firm effect, the negative relationship between the number of analysts and stock returns. For this reason, we use two samples of firms: one from the London Stock Exchange (LSE) and another from Bursa Malaysia (BM). The results reveal a significantly negative neglected firm effect only for the BM sample. In contrast the association between the number of analysts and stock returns is positive in some periods in the LSE. Size is not significant as a moderator, which suggests that the neglected firm effect does not vary with firm size, contrary to the findings in the previous literature. Finally, the neglected firm effect is nonstationary for both LSE and BM firms. Our results hold under a range of robustness tests and yield guidelines for investors regarding the types of markets and time periods for which analyst coverage is likely to matter most.


Andrikopoulos, A., & Zheng, M. (2023). A dynamic analysis of the neglected firm effect. International review of financial analysis, 85, Article 102429.

Journal Article Type Article
Acceptance Date Nov 1, 2022
Online Publication Date Nov 20, 2022
Publication Date 2023-01
Deposit Date Dec 6, 2022
Publicly Available Date Nov 21, 2024
Journal International Review of Financial Analysis
Print ISSN 1057-5219
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 85
Article Number 102429
Keywords Neglected firm effect; Stock returns; Rolling regressions; Moderation effects; Nonstationarity
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