Abstract:
In this study, we tested the presence of the neglected stock effect in Borsa Istanbul from July 2005 through June 2013. While other studies on Borsa Istanbul use trade volume as the neglect measure, we employed analyst coverage as proxy. Controlling for firm size, we investigated the presence of the neglected stock effect in two steps. First, we used a t-test to see whether the means of neglected and popular stocks’ returns were significantly different from each other. Next, we used the capital asset pricing model, Fama-French three factor, and Fama-French-Carhart four factor models to explain portfolio returns. Then we added a fifth factor for the neglected stock effect premium. The results show that neglected stock premium exists in Borsa Istanbul independent of size effect.
