Stocks of Admired Companies and Spurned Ones
Santa Clara University - Department of Finance; Tilburg University
Virginia Tech Pamplin Business School; World Bank - Financial and Private Sector Development
SCU Leavey School of Business Research Paper No. 10-02
Do stocks of admired companies yield admirable returns? Are increases in admiration followed by high stock returns? And how reliable is the relation between admiration and returns? These are the questions we answer in this paper. We study Fortune magazine’s annual list of “America’s Most Admired Companies” and find that stocks of admired companies had lower returns, on average, than stocks of spurned companies from April 1983 through December 2007. Moreover, we find that increases in admiration were followed, on average, by lower returns. We also find that the dispersion of returns is high, especially in the spurned portfolio. This implies that investors who want to benefit from the return advantage of spurned stocks must diversify widely among them.
Number of Pages in PDF File: 17
Keywords: behavioral finance, investor behavior, efficient market theory, affect
JEL Classification: G00, G10working papers series
Date posted: January 24, 2010
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo7 in 0.312 seconds