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Published in: Review of Quantitative Finance and Accounting 4/2023

15-03-2023 | Original Research

Advertising, product market competition and stock returns

Authors: Huong Le, Andros Gregoriou, Tung Nguyen

Published in: Review of Quantitative Finance and Accounting | Issue 4/2023

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Abstract

This paper studies the joint effect of advertising intensity and product market competition on stock returns. Using a sample of the US market over the period from 1977 to 2018, we provide evidence that past advertising is negatively associated with stock returns and this relationship exists only for firms in competitive industries. Also, firms in competitive markets earn higher expected stock returns than firms in concentrated industries, especially among low advertising intensity groups. Our results are robust across alternative subsamples and product market competition measures. Our empirical estimates support the positive causal effect of concentration on advertising.

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Appendix
Available only for authorised users
Footnotes
1
See for example, Lou (2014) and Vitorino (2014).
 
2
See, among others, Hou and Robinson (2006), Giroud and Mueller (2011), Gu (2016), and Chandra and Weinberg (2018).
 
3
We would like to thank an anonymous referee for making this excellent suggestion.
 
4
Results of the Fama and MacBeth regression are available from the authors upon request.
 
5
The data that supports the findings of this study are available from the corresponding author upon request.
 
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Metadata
Title
Advertising, product market competition and stock returns
Authors
Huong Le
Andros Gregoriou
Tung Nguyen
Publication date
15-03-2023
Publisher
Springer US
Published in
Review of Quantitative Finance and Accounting / Issue 4/2023
Print ISSN: 0924-865X
Electronic ISSN: 1573-7179
DOI
https://doi.org/10.1007/s11156-023-01143-6

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