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Advertising, Breadth of Ownership, and Liquidity

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  • Gustavo Grullon

Abstract

We provide empirical evidence that a firm's overall visibility with investors, as measured by its product market advertising, has important consequences for the stock market. Specifically we show that firms with greater advertising expenditures, ceteris paribus, have a larger number of both individual and institutional investors, and better liquidity of their common stock. Our findings are robust to a variety of methodological approaches and to various measures of liquidity. These results suggest that the investors' degree of familiarity with a firm may affect its cost of capital and consequently its value. Copyright 2004, Oxford University Press.

Suggested Citation

  • Gustavo Grullon, 2004. "Advertising, Breadth of Ownership, and Liquidity," Review of Financial Studies, Society for Financial Studies, vol. 17(2), pages 439-461.
  • Handle: RePEc:oup:rfinst:v:17:y:2004:i:2:p:439-461
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    File URL: http://hdl.handle.net/10.1093/rfs/hhg039
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