Do initial stock price reactions provide a good measurement stick for marketing strategies? The case of new product introductions in the US

The purpose of this paper is to examine the correspondence between the stock market's immediate reactions to new product introduction announcements and those products' subsequent commercial performance.

The main study uses standard event study methodology.

The paper finds that the stock market reacts “incorrectly” to announcements of new product introductions more often than one would expect from a market that is assumed to be highly efficient.

The paper's findings raise questions about the appropriateness of using daily stock returns to assess the profitability of marketing actions with highly uncertain outcomes.

Event studies of stock prices have been a popular method to assess the profit impact of marketing actions in a timely manner; yet, there has been surprisingly little research addressing the stock market's ability to react immediately to firm actions in a manner consistent with how effective the actions actually turn out to be. The authors' intended contribution is to guide marketing researchers investigating determinants of firm profitability.