The markets may be underpricing or not factoring in customer satisfaction when valuating company stock prices.
“We also find that customer satisfaction has a significant effect on earnings as well as on earnings surprises,” Claes Fornell, Forrest Morgeson and Tomas Hult said.
The researchers also found that the results may be generalized across various markets. For instance, when extending the analysis to the United Kingdom, using similar data available, the researchers found highly consistent results in the U.K. to those in the U.S.
Investors can tap into the research on customer satisfaction through the recently launched American Customer Satisfaction Core Alpha ETF (BATS: ACSI).
ACSI tries to reflect the performance of the American Customer Satisfactions Investable Index, which utilizes a rules-based methodology to measure the performance of large-cap U.S. stocks by gathering data from customers and utilizing a proprietary econometric model to determine a customer satisfaction score. The underlying index is sector-weighted to reflect the overall U.S. large-cap market and security-weighted based on ACSI customer satisfaction data.
ACSI survey data is based on questions that measure customer expectations, perceived quality and perceived value, according to the prospectus sheet.
Customer expectations is a measure of consumer’s anticipation of the quality of a company’s products or services, representing both prior consumption experience, which includes some nonexperiential information like advertising and word-of-mouth, and a forecast of the company’s ability to deliver quality in the future. Perceived quality is a measure of the customer’s evaluation through recent consumption experience of the quality of a company’s products or services. Lastly, perceived value is a measure of quality relative to price paid.
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