Stocks of Admired Companies and Spurned Ones | Idea Farm

Stocks of Admired Companies and Spurned Ones

Deniz Anginer, Meir Statman

Research

17 Pages

January 2010

This paper examines whether highly admired companies also make better investments, using Fortune’s corporate reputation rankings. From April 1983 through December 2007, admired companies produced lower average stock returns than spurned companies, suggesting that a strong corporate reputation does not necessarily translate into superior investment performance.

Key Takeaways

Admiration Did Not Pay: Across nearly 25 years from April 1983 through December 2007, admired companies delivered lower average returns than spurned companies.

Reputation Can Mislead: Fortune ranked companies on 8 reputation attributes, yet stronger admiration was followed, on average, by lower subsequent stock returns.

Diversification Still Matters: The study covers 1983 through 2007 and finds particularly high return dispersion among spurned stocks, making broad diversification important when evaluating the effect.

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