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Brand Perceptions and the Market for Common Stock

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Author Info
Laura Frieder (Anderson School of Management)
Avanidhar Subrahmanyam (Anderson School of Management)
Abstract

This paper investigates the effect of company brand perceptions on investor incentives to hold stocks. We find that, after controlling for other postulated determinants of stockholdings, there is a negative and significant cross-sectional relation between percentage institutional holdings and brand visibility. This finding indicates a propensity for individual investors to hold stocks with strong brand recognition, which is consistent with the hypothesis that individuals prefer to invest in companies whose products are readily recognized. Furthermore, we find that institutional holdings are positively related to firm size and beta, while being negatively related to total return volatility. Our analysis supports the notion that institutional portfolios eschew the relatively neglected sector characterized by small firms with high total volatility, whereas individual investors prefer holding stocks with low systematic risk and high recognition. The results contribute to our understanding of how financial market investors form their equity portfolios.

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Paper provided by Anderson Graduate School of Management, UCLA in its series University of California at Los Angeles, Anderson Graduate School of Management with number 1016.

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Date of creation: 29 Jun 2001
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Handle: RePEc:cdl:anderf:1016

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