Abstract

http://ssrn.com/abstract=1591083
 


 



Is A Better than B? How Affect Influences the Marketing and Pricing of Financial Securities


James S. Ang


Florida State University

Ansley Chua


Kansas State University; Florida State University - College of Business

Danling Jiang


Florida State University - The College of Business

April 15, 2010

Financial Analysts Journal, Vol. 66, No. 6, pp. 40-54, November/December 2010

Abstract:     
We investigate the role of affect on asset prices through a natural experiment inherent in the designation of dual-class IPOs and its impact on IPO underpricing. We show that issuers of dual-class IPOs could and do take consumer psychology into account and manage to sell inferior securities at higher prices via branding. In the marketing of dual-class IPOs with inferior voting rights shares, Class A shares are much more frequently adopted and, at issue date, much less underpriced than Class B shares. Class A inferior voting shares enjoy higher valuation than Class B inferior voting shares for years after IPOs. Our results are statistically and economically significant and cannot be explained by a host of firm characteristics. The evidence supports the hypothesis proposed by Statman, Fisher, and Anginer (2008) that affect has a role in the pricing of financial assets. Marketing financial securities has much in common with marketing consumer products. It is the perception, or cache, that commands price premium, not necessarily actual quality.

Keywords: Dual-Class Shares, Affect, Consumer Psychology, Initial Public Offering (IPO), IPO Underpricing

JEL Classification: G14, G30, G32

Accepted Paper Series


Not Available For Download

Date posted: April 16, 2010 ; Last revised: June 20, 2011

Suggested Citation

Ang , James S. and Chua, Ansley and Jiang, Danling, Is A Better than B? How Affect Influences the Marketing and Pricing of Financial Securities (April 15, 2010). Financial Analysts Journal, Vol. 66, No. 6, pp. 40-54, November/December 2010. Available at SSRN: http://ssrn.com/abstract=1591083

Contact Information

James S. Ang
Florida State University ( email )
College of Business
Tallahassee, FL 32306-1042
United States
904-644-8208 (Phone)
Ansley Chua
Kansas State University ( email )
Manhattan, KS 66506-4001
United States
Florida State University - College of Business ( email )
Tallahassee, FL 32306-1042
United States
850-644-0455 (Phone)
Danling Jiang (Contact Author)
Florida State University - The College of Business ( email )
821 Academic Way
P.O. Box 3061110
Tallahassee, FL 32306-1110
United States
(850)645-1519 (Phone)
HOME PAGE: http://mailer.fsu.edu/~djiang/
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