The Marketing Capability Premium

Abstract Marketing capability refers to a firm’s ability optimally deploy and integrate different marketing inputs achieve high sales at low cost. This paper examines whether the value of is incorporated into stock returns. High-level predicts better future operating performance A capability-based long-short portfolio strategy earns an average annual return 5.16%, substantial portion which earned over subsequent earnings announcements. The predictability stronger in stocks with higher valuation uncertainty lower investor attention. Investors underreact value-relevant, but difficult process, information embedded capability. (JEL G12, G14, G10, M30) Authors have furnished Internet Appendix, available on Oxford University Press Web site next link final published online.