Glamour Brands and Glamour Stocks
45 Pages Posted: 17 Mar 2010 Last revised: 13 May 2014
Date Written: April 10, 2012
We explore the influence of customer perceptions from the product market on firms’ return characteristics in the stock market. Using a unique dataset containing customers’ opinions on over 1,200 brands, we find that stocks of companies with prestigious brands have large negative loadings on the Fama-French HML factor. This relation holds after controlling for risk explanations of HML (distress risk and asset irreversibility/growth). This relation, however, does not persist over time: it appears (dissipates) when overall market-wide investor sentiment is high (low); it attenuates as the brand becomes well-known; it varies as customer perceptions vary over time; and it diminishes as institutional holdings increase. Overall we conclude that glamour in the product market appears to partially drive glamour in the stock market.
Keywords: Glamour, Brand equity, HML factor
JEL Classification: G12, G14
Suggested Citation: Suggested Citation