New Product Announcements and Stock Investor Reactions: A Behavioral Model Based on Bass Model

Abstract

Abstract:

New product announcement is frequently regarded by stock investors as a signal foretelling stock price swings. However, existing researches focus mainly on the product marketing and customers' reactions to new products, with little attention to the stock market reactions. By paying attention to the diffusion process of NPA on the stock market, this paper investigates the underlying characteristics of different kinds of investors' reaction to NPA. Based on the Bass model, this study builds a behavioral model of stock investors' reaction to new product announcements. Some numerical experimentations of the model are highlighted to test the relationship between some primary parameters and the investor reactions. In order to test the model, empirical tests are developed using daily time series data for 20 Chinese listed firms over the period from January 2011 to December 2015. The results illustrate that our model is in good agreement with the current economic data. In several ways, this paper contributes to the growing theoretical literature on the stock market reactions to new product announcements and gives some decision-making reference to the stock investors and the firm managers.

Key words: new product announcements, investor reactions, behavioral model, Bass model

Hao Fanhao, Wang Tienan, Zhao Chao. New Product Announcements and Stock Investor Reactions: A Behavioral Model Based on Bass Model[J]. , 2019, 31(1): 48-61.

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