The Efficiency of Marketing and Stock Returns

91 Pages Posted: 7 Aug 2018 Last revised: 2 Aug 2019

See all articles by Tze Chuan 'Chewie' Ang

Tze Chuan 'Chewie' Ang

Deakin University - Department of Finance; Financial Research Network (FIRN)

Tarun Chordia

Emory University - Department of Finance

Van Anh (Vivian) Mai

Deakin University - Faculty of Business and Law

Harminder Singh

Deakin University - School of Accounting, Economics and Finance

Date Written: August 1, 2019

Abstract

A firm’s marketing efficiency, the ability to optimally deploy and integrate different marketing inputs to achieve high sales revenue at low cost, is persistent. High marketing efficiency predicts better future operating performance and stock returns, especially in competitive industries. A marketing efficiency-based long-short portfolio strategy earns an average annual return of 5.16%, a substantial portion of which is earned over subsequent earnings announcements. The return predictability is stronger in stocks with higher valuation uncertainty and lower investor attention. The evidence suggests that investors underreact to the value-relevant, but hard to process, information embedded in marketing efficiency.

Keywords: Marketing efficiency, underreaction, return predictability, limited attention, fluency

JEL Classification: G12, G14, G10, M30

Suggested Citation

Ang, Tze Chuan and Chordia, Tarun and Mai, Van Anh (Vivian) and Singh, Harminder, The Efficiency of Marketing and Stock Returns (August 1, 2019). Available at SSRN: https://ssrn.com/abstract=3224925 or http://dx.doi.org/10.2139/ssrn.3224925

Tze Chuan Ang (Contact Author)

Deakin University - Department of Finance ( email )

221 Burwood Highway
Burwood, Victoria 3125
Australia
+61 3 9244 6626 (Phone)

HOME PAGE: http://www.deakin.edu.au/profiles/tze-ang

Financial Research Network (FIRN)

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

HOME PAGE: http://www.firn.org.au

Tarun Chordia

Emory University - Department of Finance ( email )

Atlanta, GA 30322-2710
United States
404-727-1620 (Phone)
404-727-5238 (Fax)

Van Anh (Vivian) Mai

Deakin University - Faculty of Business and Law ( email )

Burwood, Victoria 3215
Australia

Harminder Singh

Deakin University - School of Accounting, Economics and Finance ( email )

221 Burwood Highway
Burwood, Victoria 3215
Australia

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
303
Abstract Views
1,590
Rank
188,610
PlumX Metrics