Prof. Harminder Singh of Deakin University is giving a talk on Tuesday, 16th August in Seminar Hall 1 at 2:30 p.m. The title of his talk is: “Marketing capability and stock returns”. A brief abstract is given below.
We find that firms’ marketing capability – the ability to deploy marketing resources to achieve desired sales revenue – is predictable and persistent. Marketing capability positively predicts future operating performance and stock returns even after controlling for firm characteristics and risks. A long-short portfolio strategy based on marketing capability earns a return of 0.5% per month. The diminishing return predictability over the long run reflects investors’ delay in incorporating the information about marketing capability in stock prices. Consistent with a mispricing-based explanation, the marketing capability-return relation is persistent over time and is dominant in stocks with limited investor attention and binding limits-to-arbitrage.