The Duality of Fashion

How industry norms impact market returns in the fashion industry.

Designs produced in fashion industry exist at the helm of creative innovation and utilitarian construction. The dual-nature of the clothing we wear, to cover our bodies and to express our tastes, has important implications for regulating copying and counterfeiting in an industry that thrives through its unified effort toward trend-based seasonal output. Understanding how fashion firms interact with their available intellectual property (IP) protections (i.e., patents, copyrights, trademarks) and how they leverage these can be a useful tool to guide firm and industry-level decisions. I analyze sentiment variation across IP infringement news headlines in the fashion and consumer technology industries using text analysis techniques and find no significant variation across the entire sample, on average. Through the event study methodology, I observe abnormal returns in the stock market as investors react to news of IP infringement in both the fashion and consumer technology industries. A Z-test for significance determines that the average cumulative abnormal return did not indicate significant wealth effects in the days following the media headlines in either industry. I then perform an econometric study of the impact of news headline sentiment on cumulative abnormal returns to understand whether or not the market is receiving value messages fashion’s norms-based regulatory system. I find that the sentiment effects on abnormal returns do not vary across industry, suggesting that media messaging in the fashion is not adequately compensating the lack of state-backed protections offered to its designers.

View a Python-based version of this work on my GitHub.