Investor Corporate Visits and Predictable Returns

Eric C. So, Rongfei Wang, and Ran Zhang

♦ Using a unique dataset of firms listed on China’s Shenzhen Stock Exchange, we show that investors’ corporate site visits convey information about future stock returns.  Firms with abnormally frequent investor visits predictably outperform firms with abnormally infrequent investor visits by approximately 70-to-100 basis points per month.  This return predictability concentrates in neglected firms with low trading volumes and when investors incur higher travel costs.  Abnormally frequent investor visits accompany increased holdings among visiting institutions and predict improvements in firms’ fundamental performance, consistent with institutions using visits to gain an information advantage regarding underpriced firms.

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