Bow to Walter the Merciless, for he definitely influences the market and can decide if a product is worthy of living or not. At least according to "The Value of Quality: Stock Market Returns to Reviewed Quality of New Products," a new research paper that has analyzed Mossberg's product reviews and their effect on companies' valuations during a 10-year period. The conclusion: He could make stock prices tank or soar by as much as 10%. And that's without using his mental control powers.
The study, by Gerard J. Tellis-from the University of Southern California-and Joseph Johnson-from the University of Miami (well, hello there alma mater), points out that the average change in actual stock valuation is $200 million down (a 5% drop) for bad reviews and $500 million for good product reviews.
Product quality is probably under-valued by firms because there is little consensus about appropriate measures and methods to research quality. We suggest that published ratings of a product's quality are a valid source of quality information with important strategic and financial impact. We test this thesis by an event analysis of abnormal returns to stock prices of firms whose new products are evaluated in the Wall Street Journal. Quality has a strong immediate effect on abnormal returns, which is substantially higher than that for other marketing events assessed in prior studies. Moreover, there are some important asymmetries in the effect. We discuss the research, managerial, investing, and policy implications.