Most people think investors can predict how a product will preform but this is not the case. Turns out, investors predicted a product’s future performance successfully only 48 percent to 55 percent of the time. When new products come out it is almost like a coin toss to predict the short term future. The study did find, however, that short-term market reactions to preannouncements can reliably predict product performance under certain circumstances.
Key Takeaways:
- Contrary to what many in the business world believe, investors cannot reliably predict how a new product will perform, finds a new study co-authored by a Michigan State University marketing expert.
- The research examined short-term market returns, or investor reactions, following the preannouncements of 208 vehicles in the U.S. auto industry between 2001 and 2014. Turns out, investors predicted a product’s future performance successfully only 48 percent to 55 percent of the time.
- The findings may be applicable to other industries, such as information technology and pharmaceuticals, that rely on preannouncements to spread the word about upcoming products. As an example, Apple’s stock dipped by 6.7 percent in three days after the preannouncement of the first-generation iPad, but the product went on to become wildly successful.
“Contrary to what many in the business world believe, investors cannot reliably predict how a new product will perform, finds a new study co-authored by a Michigan State University marketing expert.”
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