Brand Equity & Shareholder Value: Portfolio Returns of Strong Brands

Sammanfattning: This study is the first to investigate the effects that strong brands, as estimated by Interbrand Ltd, have on shareholder value creation on the European market. We show that multiple trading strategies based on long positions in companies owning strong brands between January 2005 and February 2012 generate an average excess return of up to 12.7% over the 12 months following the portfolio formation. High-end brands perform especially well. All returns are robust to the risk factors in the Fama-French (1993) and Carhart (1997) four-factor model. Our findings are in line with Kerin and Sethuraman (1998), Bart et al (1998) and Madden et al (2006). We believe that our research is useful for (i) boardrooms, to realize how brands create shareholder value and (ii) investors, to assess the value of strong brands and ultimately the value of firm equity, which can be translated into a trading strategy.