Does Brand Strength Lead to Better Returns?

On a day when the Dow Jones closed down more than 4%, this study sparked my interest: Jennifer Openshaw, the founder of an investment advice website called WeSeed, took a look at the stock performance of the 100 brands on this year’s BusinessWeek/Interbrand Best Global Brands ranking, and found they massively outperformed the S&P 500 from the beginning of 2000 through until December of 2008, with the Best Global Brands’ shares rising an average of 31%, compared with the S+P’s 28% drop.

Obviously it isn’t a perfect correlation — our number one ranked brand, Coca-Cola, fell by more than 20% during that time period. And we’ve also included flameouts like AIG and Merrill Lynch. But that’s not to say no correlation exists. Last summer we took a look at companies spending on advertising despite the recession, and found a disproportionate number of legendary ad campaigns debuted during recession years. I’d be curious to learn if anyone else has done research in this area.

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