Valuation of New Trademarks
Po-Hsuan Hsu, Dongmei Li, Qin Li, Siew Hong Teoh, Kevin Tseng
Management Science · 2022 · Volume 68 · Issue 1
Abstract
Firms often register trademarks as they launch new products or services. We find that the number of new trademark registrations positively predicts firm profitability, stock returns, and underreaction by analysts in their earnings forecasts. Using the Federal Trademark Dilution Act (FTDA) as an exogenous shock to trademark protection, we find that greater trademark protection strengthens the predictability of new trademark registrations. Together, our evidence suggests that investors undervalue new trademark registrations. This paper was accepted by Gustavo Manso, finance.
Keywords
innovation, trademarks, exploratory trademarks, stock returns, limited attention, uncertainty, market efficiency, analyst forecast, anomalies, trading strategies
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