Reexamining possible mispricing of customer satisfaction

Arbeitspapier

There has been a recent debate in the marketing literature concerning the possible mispricing of customer satisfaction. While earlier studies claim that portfolios with attractive out-of-sample properties can be formed by loading on stocks whose firms enjoy high customer satisfaction, later studies challenge this finding. A large part of the disagreement stems from the difficulty of how to actually evaluate mispricing based on the observed portfolio returns. In particular, any portfolio formation method that requires the use of a risk model is open to the criticism of time-varying risk factor loadings due to the changing composition of the portfolio over time. As an alternative, we construct portfolios that are neutral with respect to the desired risk factors a priori. Consequently, no risk model is needed when analyzing the observed returns of our portfolios. Using various ways of measuring customer satisfaction, we do not find any convincing evidence that portfolios that load on high customer satisfaction lead to abnormal returns.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 79

Classification and Topics

• Classification: Wirtschaft ; Portfolio Choice; Investment Decisions ; Asset Pricing; Trading Volume; Bond Interest Rates
• Subject: customer satisfaction ; financial performance ; long-short portfolio ; mispricing

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bell, David R. ; Ledoit, Olivier ; Wolf, Michael
• Event: Veröffentlichung
• (who): University of Zurich, Department of Economics
• (where): Zurich
• (when): 2012

Further information

• DOI: doi:10.5167/uzh-62713
• Handle: http://hdl.handle.net/10419/77553
• Last update: 10.03.2025, 11:42 AM CET