Is sustainable competitive advantage an advantage for stock investors?
Yi Liu and
The Quarterly Review of Economics and Finance, 2017, vol. 63, issue C, 299-314
Investing in stocks of companies with sustainable competitive advantage, the moat, does not earn higher raw returns. These companies tend to be larger, financially stronger, and have lower book-to-market ratios (growth stocks). After controlling for size, book-to-market ratio and other risk factors, sustainable competitive advantages is a positive factor affecting cross-section of stock returns. Firms with sustainable competitive advantage also seem to be shielded from mean reversion of higher profitability better than non-wide moat firms.
Keywords: Investment; Economic moat; Sustainable competitive advantage; Asset pricing; Cross-section of stock returns (search for similar items in EconPapers)
JEL-codes: G11 (search for similar items in EconPapers)
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