Brand Perceptions and the Market for Common Stock

58 Pages Posted: 10 Apr 2002

See all articles by Laura Frieder

Laura Frieder

Purdue University - Krannert School of Management

Avanidhar Subrahmanyam

University of California, Los Angeles (UCLA) - Finance Area; Institute of Global Finance, UNSW Business School; Financial Research Network (FIRN)

Date Written: December 9, 2003

Abstract

This paper investigates the effect of company brand perceptions on investor incentives to hold stocks. We find that, after controlling for other postulated determinants of stockholdings, there is a negative and significant cross-sectional relation between percentage institutional holdings and brand visibility. This result is consistent with the notion that individual investors prefer to invest in stocks with easily-recognized products. Furthermore, we find that institutional holdings are positively related to firm size and beta. These results are intertemporally stable. Our analysis supports the notion that institutional portfolios eschew the relatively neglected small firm sector, whereas individual investors prefer holding stocks with high recognition and consequently, greater information flows and smaller parameter estimation risk. The analysis contributes to our understanding of how investors form their equity portfolios.

Keywords: Institutional holdings, market efficiency

JEL Classification: G1, G2

Suggested Citation

Frieder, Laura and Subrahmanyam, Avanidhar, Brand Perceptions and the Market for Common Stock (December 9, 2003). Available at SSRN: https://ssrn.com/abstract=299522 or http://dx.doi.org/10.2139/ssrn.299522

Laura Frieder

Purdue University - Krannert School of Management ( email )

1310 Krannert Building
West Lafayette, IN 47907-1310
United States

Avanidhar Subrahmanyam (Contact Author)

University of California, Los Angeles (UCLA) - Finance Area ( email )

Los Angeles, CA 90095-1481
United States
310-825-5355 (Phone)
310-206-5455 (Fax)

Institute of Global Finance, UNSW Business School

Sydney, NSW 2052
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

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