Well, there it is, in the pages of the Harvard Business Review for November 2010: Finance prof David Yermack of NYU reports in “Vision Statement: How This First Lady Moves Markets” that Michelle Obama’s choice of outfits generates “abnormal returns” for stocks of publicly traded companies behind the fashion brands.
Who’d have thought the First Lady might become a tool for investor relations?
Yermack reports on 189 public appearances by Obama – FLOTUS, not POTUS – in which she wore 245 items of apparel with recognizable brands of 29 public companies. For those 29 companies, her wardrobe choices generated a total value of $2.7 billion, Yermack says. You read it right: $2.7 billion, with a B.
When the First Lady jetted off on a one-week tour of Europe in March-April 2009, for example, her fashion choices were much in the media – and Yermack calculates the stocks of fashion and retail companies whose clothes she wore rose an average of 16.3%, beating the S&P 500 gain of 6.1%. For 18 major appearances, the cumulative abnormal return averaged 2.3%, he says.
A hedge fund could build a trading strategy on this First Lady Fashion Anomaly. The NYU Finance prof observes:
The stock price gains persist days after the outfit is worn and in some cases even trend slightly higher three weeks later. Some companies that sell clothes that Obama frequently wears, such as Saks, have realized long-term gains. Her husband’s approval rating appears to have no effect on the returns.
This is about impact on revenue (and perhaps investors’ perceptions), not some kind of fashion voodoo like the stock market hemline indicator. And her impact exceeds that of other celebrities or models, Yermack says. He explains it this way:
The unparalleled robustness of the Michelle Obama effect results from the confluence of three factors: her personal interest in fashion, recognized by consumers as authentic; her position as First Lady and the intangible value it confers; and the power of the social internet and e-commerce. Descriptions and images of what she’s wearing spread across the social internet in near-real time, and consumers can buy these fashions almost instantly online.
So figure out how to get your product on the First Lady, preferably for a high-profile event like a state dinner or tour of world capitals. IR needs to be creative!