“Tiger Woods hurt us all!”

That was the subject of an email from Prof. Knittle to the economics mail list regarding his new event study. The SF Examiner writes it up better than I can, but here’s the key graph.
tigerwoods

Companies that had endorsed Woods saw dramatic negative abnormal returns (i.e. stock returns relative to a comparison group of stocks) days after the announcement of his retirement.

It would be interesting to see what the long-run impact of Tiger’s demise will be on these companies’ stocks. Have we uncovered a “Tiger Woods” anomaly?! If not, paparazzi perform a valuable function. They make markets more rational!

4 Responses to ““Tiger Woods hurt us all!””

  • Stock prices should capture what traders expect this scandal to do to the earnings or sales of those companies. It’s probably at least as interesting to look at the actual effect.

  • sraffa says:

    Even if the article is correct, did shareholders really lose “billions”? Wouldn’t consumers just purchase from there competitors and thus boost the competitor’s stock prices. Maybe I’m being too “macro” about it but this was my first impression.

    To take it to the extreme, would a ban on celebrity endorsements be harmful to the economy? Advertising that informs the consumer is clearly beneficial, but I don’t really see a huge benefit to celebrity endorsements. I’m not implying that celebrity endorsements should be banned, since people should be free to choose brands for whatever reasons they want. But on the other hand, talking about 14 billion dollars in losses is probably a huge exaggeration for a celebrity’s effect on overall shareholder value.

  • pushmedia1 says:

    sraffa, that’s right. This was redistribution.

    Perhaps, though, drinking Gatorade rather than water gives higher utility *because* its endorsed by Woods. The question here is whether drinking Woods-backed Gatorade gives you more utility than Shawn Merriman-backed Powerade (I don’t know who that is but don’t go to the powerade website to confirm it… annoying music and flash nonsense).

  • I was going to nitpick that the article uses the phrase “economic loses”, which for me suggests DWL, to mean a capital loss to shareholders of several companies. Pushmedia1 is right, preferences can be weird so it’s not clear what’s the welfare bottomline.