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Do investors mistake a good company for a good investment?
Do investors confuse the quality of a firm with its attractiveness as an investment? If so, shares of well-run companies will be bid up too high and subsequently earn negative abnormal returns. Our analysis of Fortune magazine?s annual survey of "America?s Most Admired Companies" for 1983-96 finds the opposite. A portfolio of the most admired decile of firms earns an abnormal return of 3.2 percent in the year after the survey is published and 8.3 percent over three years. The least admired decile of firms earns a negative abnormal return of 8.6 percent in the nine months through the end of the year, more than half of which is reversed in the first quarter of the following year. The magnitude of these abnormal returns and their persistence over five years suggest that well admired firms are not overpriced. The timing of returns to least admired firms provides evidence of window dressing.
AUTHORS: Antunovich, Peter; Laster, David S.
Fifteen minutes of fame? The market impact of internet stock picks
We examine 120 Nasdaq and Over-the-Counter "buy" recommendations made by Internet sites from April 1999 to June 2001. The stock picks show substantial short- and long-run price and liquidity gains, although no new information is revealed about them. For example, liquidity one year after the pick day remains higher for these stocks than for a sample matched according to size, book-to-market value, and liquidity in the preceding year. In addition, after controlling for fundamental and microstructure factors, we find that stocks with lower initial liquidity have greater improvements in liquidity on the pick day. Further, stocks with lower initial liquidity and higher pick-day liquidity have higher pick-day excess returns. These results suggest that stocks have multiple liquidity equilibria, and that the stock picks, by coordinating uninformed trading activity, push initially illiquid stocks to a higher liquidity equilibrium. Finally, we find that stocks with higher initial media exposure enjoy greater liquidity gains and lower excess returns on the pick day.
AUTHORS: Antunovich, Peter; Sarkar, Asani
Are high-quality firms also high-quality investments?
The relationship between corporate reputation and investment results is the subject of ongoing debate. Some argue that high-quality firms ultimately provide superior stock price performance; others counter that stock prices already reflect these firms' prospects for growth and profitability. This study advances the debate by providing fresh evidence that investing in high-quality firms yields above-average returns and that these superior returns continue for up to five years.
AUTHORS: Antunovich, Peter; Mitnick, Scott; Laster, David S.