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Findings—Using Stock Prices to Predict Market Events: Evidence on Sales Takeoff and Long-Term Firm Survival

HEC-Paris, 78350 Jouy-en-Josas, France
Stern School of Business, New York University, New York, New York 10012
markovitch{at}hec.fr
pgolder{at}stern.nyu.edu

We evaluate whether stock prices can predict the sales takeoff and the long-term survival of firms at takeoff. We find that abnormal returns are strongly positive in the year prior to takeoff, thus suggesting an important signal of the takeoff. Moreover, we find that negative abnormal returns in the year of takeoff and one year after takeoff increase the hazard of market exit by 9.5 times relative to firms without these negative abnormal returns. We discuss the implications of these findings for managers and researchers.

Key Words: sales takeoff; stock market forecast; event study; new product research; product life cycle; forecasting; product management
History: Received: January 18, 2007;