(Mostly) Happy New Year from Equities

Happy new year to you Lawrentians and other fellow travelers. The Dow was up nearly 20% over the past 12 months, so perhaps our collective fortunes are on an upward trajectory. Unless, of course, you were holding “The Tiger Fund.”

Shareholder Value Destruction following the Tiger Woods Scandal

Christopher Knittel & Victor Stango

University of California Working Paper

December 2009

Abstract: We estimate that in the days beginning with Tiger Woods’ recent car accident and ending with his announced “indefinite leave” from golf, shareholders of companies that Mr. Woods endorses lost $5-12 billion in wealth. We measure the losses relative to both the entire stock market and a set of competitor firms. Because most of the firms that Mr. Woods endorses are either large or owned by large parent companies, the losses are extremely widespread. Mr. Woods’ top five sponsors (Accenture, Nike, Gillette, Electronic Arts and Gatorade) lost 2-3 percent of their aggregate market value after the accident, and his core sports related sponsors EA, Nike and PepsiCo (Gatorade) lost over four percent. The pace of losses slowed by December 11, the date on which Mr. Woods announced his leave from golf, but as late as December 17 shareholders had not recovered their losses.

See you in 2010.