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Advertising, Attention, and Financial Markets

Author

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  • 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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    More about this item

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising

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