The Value of Quality: Stock Market Returns to Reviewed Quality of New Products

41 Pages Posted: 7 Feb 2007

See all articles by Gerard J. Tellis

Gerard J. Tellis

University of Southern California - Marshall School of Business, Department of Marketing

Joseph Johnson

University of Miami - Department of Marketing

Date Written: February 2007

Abstract

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.

Keywords: Stock returns, Quality, Published reviews, New product

Suggested Citation

Tellis, Gerard J. and Johnson, Joseph, The Value of Quality: Stock Market Returns to Reviewed Quality of New Products (February 2007). Marshall School of Business Working Paper No. MKT 02-07. Available at SSRN: https://ssrn.com/abstract=961472 or http://dx.doi.org/10.2139/ssrn.961472

Gerard J. Tellis (Contact Author)

University of Southern California - Marshall School of Business, Department of Marketing ( email )

Hoffman Hall 701
Los Angeles, CA 90089-0443
United States
213-740-5031 (Phone)
213-740-7828 (Fax)

HOME PAGE: http://gtellis.net

Joseph Johnson

University of Miami - Department of Marketing ( email )

United States

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