The Value of Quality: Stock Market Returns to Reviewed Quality of New Products
Gerard J. Tellis
University of Southern California - Marshall School of Business, Department of Marketing
University of Miami - Department of Marketing
Marshall School of Business Working Paper No. MKT 02-07
Product quality is probably under-valued by firms because there is little consensus about appropriate measures and methods to research quality. We suggest that published ratings of a product's quality are a valid source of quality information with important strategic and financial impact. We test this thesis by an event analysis of abnormal returns to stock prices of firms whose new products are evaluated in the Wall Street Journal. Quality has a strong immediate effect on abnormal returns, which is substantially higher than that for other marketing events assessed in prior studies. Moreover, there are some important asymmetries in the effect. We discuss the research, managerial, investing, and policy implications.
Number of Pages in PDF File: 41
Keywords: Stock returns, Quality, Published reviews, New productworking papers series
Date posted: February 7, 2007
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