Valuation of New Trademarks
71 Pages Posted: 15 Aug 2018 Last revised: 11 Sep 2020
Date Written: September 11, 2020
Firms often register trademarks as they launch new products or services. We find that the number of new trademark registrations positively predicts firm profitability, stock returns, and underreaction by analysts in their earnings forecasts. Using the Federal Trademark Dilution Act (FTDA) as an exogenous shock to trademark protection, we find that greater trademark protection strengthens the predictability of new trademark registrations. Together, our evidence suggests that investors undervalue new trademark registrations.
Keywords: Innovation, Trademarks, Exploratory trademarks, Stock returns, Limited attention, Uncertainty, Market efficiency, Analyst forecast
JEL Classification: E22, G11, G12, G14, O34, M31
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