Previously, the rich customers bought expensive luxury goods, the impoverished customers bought cheap low quality merchandise and the middle class customers stayed true and loyal to the middle market. However, today there has been a change in the customer shopping behaviour, especially among the middle class customers who no longer want to be stuck in mediocrity. Either the customers “trade up”, which means that they buy goods with higher price and quality; or they “trade down”, which means that they buy cheaper low quality goods. This has created a change, which means that around the world, premium and no-frills products are squeezing middle-of-the-road products and services. Sales in the middle market are pressed while sales on both the top end and the bottom end of the market are rapidly growing. The market conditions are changing and this thesis is written with the purpose to analyse the given market situation - giving companies, primarily in the fashion industry, an opportunity to overview the possibilities for positioning on a market where the gap between discount and premium brands is getting bigger. Obviously, the phenomenon of market polarization will continue and the pressure on the companies to change will increase. This thesis discus therefore how a company can position and reposition itself in the emerging and ever changing environment. Three companies have been researched – Helly Hansen, Pennyblack and Nova Star. The choice of the companies have been made on the basis of all being active on the Scandinavian middle market practicing in three different parts of the fashion industry, which gives this study a broader approach. The study is qualitative and based on interviews with representatives from each company. After conducting the interviews and analysing the empirical framework, the conclusions suggest that the most beneficial way for a company to position itself on the current saturated market is by differentiating themselves, providing something that the competitors cannot offer. Nevertheless, the differentiation has nowadays become more complex and convoluted. This happened since the saturation has made attributes that previously have been seen as unique - such as for example, superior quality and design, to be mainly common. The saturated market leads to more and more tough competition between the companies. The study shows that this actually is the reason making the companies to try to make profit everywhere, attempting to reach people that should not fall within their targeted segment. On the contrary, it is more beneficial to target as narrowly as possible, specifically aiming at the consumers that would actually benefit form the products a company offers. Lastly, the results indicate that the International brands attempting to enter the Scandinavian market should be prepared to adjust their strategies, since the Scandinavian market seems to be different from the rest of the world. / Program: Master in Fashion Management with specialisation in Fashion Marketing and Retailing

Over the years there has been significant research around the misspecification of the Capital Asset Pricing Model (CAPM), which challenges the linear relationship between beta and market returns. One of the biggest challenges relates to the “small-firm effect,” which states there are two classifications of stocks (large and small) and that the companies with small-market capitalizations have higher returns. However, the definition of a small-cap is vague and there has been little focus in academia on the stocks in the middle-market capitalization deciles. Despite this, institutional and retail investors created the “mid-cap” category in the early 1990s and, since then, the risk-adjusted returns have been exceptional, relative to small- and large-cap stocks. This study examined mid-cap stocks from an academic perspective and delves into the “mid-cap myth” by evaluating the category over the past 85 years to answer the question around whether mid-caps are superior to other asset class. The results revealed that the highly touted and advertised mid-cap stock performance premium during the 1980-2013 time period was statistically insignificant. Moreover, mid-caps did have superior risk-adjusted returns over the extended time period studied (1928 to 2014); however, these superior returns relative to small-caps were not driven by the uniqueness of the mid-sized companies, but by the underperformance of small-cap stocks, specifically small-cap growth stocks. When studying the behavior or migration of mid-size companies, they do not appear to exhibit unusual behavior relative to companies with smaller market capitalizations, especially in the area of mergers and acquisitions. Thus, the question becomes why small-cap companies underperform relative to their risk level. The answer lies in the inclusion of the NASDAQ stocks to the CRSP database after 1972. This change not only doubled the number of stocks deemed small-caps, but also added a significant number of unprofitable fast-growing companies to the small-cap growth category, specifically in the technology and healthcare industries. The study benefits practitioners by providing insight into the omnipresent claim of mid-cap outperformance from 1980-2014, while also benefiting academia by providing more insight into small-caps’ underperformance during this period and how investigating small-cap growth companies further could add insight into the viability or magnitude of the size and value premium going forward.

I investigate a simple merger arbitrage strategy with a focus on middle-market companies. I estimate [-1, 1] buy-and-hold abnormal returns (BHARs) and long-run BHARs of prospective middle-market acquirers after they announce an acquisition and test whether [-1, 1] BHARs are predictive of subsequent long-run holding period returns (HPRs) and long-run BHARs. The [-1, 1] BHARs are calculated for 57 acquiring companies, and then separated into two equal-weight portfolios: one of positive [-1, 1] BHARs (referred to as the long portfolio) and one of negative [-1, 1] BHARs (referred to as the short portfolio). I then calculate the HPR and long-run BHARs over the following time horizons: [2, 22], [2, 43], [2, 64], [2, 127], and [2, 253]. I perform a Student’s t-test comparing the means of the HPRs of the two portfolios and find that the long and short [2, 22] and [2, 64] HPRs have statistically different mean returns. Similarly, I perform a Student’s t-test comparing the means of the BHARs of the two portfolios and find that the difference in the means are not statistically significant. I also regress the different long-run BHARs on [-1, 1] BHARs, adjusted [-1, 1] BHARs, and normalized [-1, 1] BHARs. Adjusted [-1, 1] BHARs are adjusted for the effects of known predictive factors found in prior literature such as the type of payment. For example, if the type of payment is cash, 2.40 percentage points of the [-1, 1] BHAR is attributed to the cash payment. Normalized [-1, 1] BHARs divide each [-1, 1] BHAR by each security return’s standard deviation over the following trading days: [-22, -2]. I find [-1, 1] BHARs and adjusted [-1, 1] BHARs of middle-market lack statistically significant effects on long-run BHARs over the [2, 22], [2, 43], [2, 127], and [2, 253] horizons. [-1, 1] BHARs and adjusted [-1, 1] BHARs of middle-market firms have statistically significant effects on [2, 64] BHARs. Therefore, a possible merger arbitrage strategy may exist for predicting BHARs for the [2, 64] horizon. The strategy consists of an investor going long on all acquirers that have a positive [-1, 1] BHAR and short on all acquirers that have a negative [-1, 1] BHAR over the following trading days: [2, 64]. After the [-1, 1] BHARs are normalized, however, the normalized [-1, 1] BHARs are no longer statistically significant when predicting any long-run BHAR. On the whole, I find the Efficient Market Hypothesis – which states that the market efficiently prices the information released into the market after an acquisition announcement – is correct, at least with respect to the information contained in [-1, 1] BHARs.