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Advertising, Attention, and Financial Markets

Author

Listed:
  • Florens Focke
  • Stefan Ruenzi
  • Michael Ungeheuer

Abstract

Using daily advertising data, we analyze the short-term effects of advertising on investor attention and on financial market outcomes. Based on various investor attention proxies, we show that advertising positively affects attention. However, it has only little impact on turnover and liquidity. Most importantly, short-term stock returns are not significantly influenced by advertising. Further results suggest that previous findings of an economically significant positive relation between advertising and returns are due to reverse causality. Thus, the belief that stock prices can be temporarily inflated via advertising is misguided.

Suggested Citation

  • Florens Focke & Stefan Ruenzi & Michael Ungeheuer, 2020. "Advertising, Attention, and Financial Markets," The Review of Financial Studies, Society for Financial Studies, vol. 33(10), pages 4676-4720.
    • Handle: RePEc:oup:rfinst:v:33:y:2020:i:10:p:4676-4720.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhz142
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    Citations

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    Cited by:

    1. Arnold, Marc & Pelster, Matthias & Subrahmanyam, Marti G., 2022. "Attention triggers and investors’ risk-taking," Journal of Financial Economics, Elsevier, vol. 143(2), pages 846-875.
    2. Jūra Liaukonytė & Alminas Žaldokas, 2022. "Background Noise? TV Advertising Affects Real-Time Investor Behavior," Management Science, INFORMS, vol. 68(4), pages 2465-2484, April.
    3. Qingjie Zhou & Panpan Zhu & You Wu & Yinpeng Zhang, 2022. "Research on the Volatility of the Cotton Market under Different Term Structures: Perspective from Investor Attention," Sustainability, MDPI, vol. 14(21), pages 1-20, November.
    4. Ahmed, Walid M.A. & Sleem, Mohamed A.E., 2023. "Short- and long-run determinants of the price behavior of US clean energy stocks: A dynamic ARDL simulations approach," Energy Economics, Elsevier, vol. 124(C).
    5. Bai, Jing & Tang, Xuesong & Zheng, Yuxin, 2023. "Serving the truth: Do directors with media background improve financial reporting quality?," International Review of Financial Analysis, Elsevier, vol. 85(C).
    6. Bernard, Sabine Esther & Weber, Martin & Loos, Benjamin, 2023. "How speculative asset characteristics shape retail investors' selling behavior," SAFE Working Paper Series 378, Leibniz Institute for Financial Research SAFE.
    7. Chen, Rongxin & Lepori, Gabriele M. & Tai, Chung-Ching & Sung, Ming-Chien, 2022. "Explaining cryptocurrency returns: A prospect theory perspective," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 79(C).
    8. Su, Zhifang & Wang, Luhan & Liao, Jing & Cui, Xin, 2023. "Peer effects in corporate advertisement expenditure: Evidence from China," Research in International Business and Finance, Elsevier, vol. 64(C).
    9. Cui, Xin & Ji, Xinyuan & Meng, Wei & Song, Qi, 2023. "Product market competition and corporate advertising expenditure: Evidence from a natural experiment," Research in International Business and Finance, Elsevier, vol. 64(C).
    10. Cahill, Daniel & Ho, Choy Yeing (Chloe) & Yang, Joey W., 2022. "The COVID-19 pandemic: How important is face-to-face interaction for information dissemination?," Global Finance Journal, Elsevier, vol. 54(C).
    11. Xin Chen & Wei He & Libin Tao & Jianfeng Yu, 2023. "Attention and Underreaction-Related Anomalies," Management Science, INFORMS, vol. 69(1), pages 636-659, January.
    12. Edeling, Alexander & Srinivasan, Shuba & Hanssens, Dominique M., 2021. "The marketing–finance interface: A new integrative review of metrics, methods, and findings and an agenda for future research," International Journal of Research in Marketing, Elsevier, vol. 38(4), pages 857-876.
    13. Imane El Ouadghiri & Mathieu Gomes & Jonathan Peillex & Guillaume Pijourlet, 2022. "Investor Attention to the Fossil Fuel Divestment Movement and Stock Returns," Post-Print hal-03549713, HAL.
    14. Wang, Chen & Shen, Dehua & Li, Youwei, 2022. "Aggregate Investor Attention and Bitcoin Return: The Long Short-term Memory Networks Perspective," Finance Research Letters, Elsevier, vol. 49(C).

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