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Attracting investor attention through advertising

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  • Lou, Dong

Abstract

This paper provides evidence that managers adjust firm advertising, in part, to attract investor attention and influence short-term stock returns. First, I show that increased advertising spending is associated with a contemporaneous rise in retail buying and abnormal stock returns, and is followed by lower future returns. Next, I document a significant increase in advertising spending prior to insider sales, and a significant decrease in the subsequent year. Additional analyses suggest that the inverted-V-shaped pattern in advertising spending around insider sales is most consistent with managers' opportunistically adjusting firm advertising to exploit the temporary return effect to their own benefit.

Suggested Citation

  • Lou, Dong, 2013. "Attracting investor attention through advertising," LSE Research Online Documents on Economics 54382, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:54382
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    File URL: http://eprints.lse.ac.uk/54382/
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    References listed on IDEAS

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    Cited by:

    1. Umit G. Gurun & Gregor Matvos & Amit Seru, 2016. "Advertising Expensive Mortgages," Journal of Finance, American Finance Association, vol. 71(5), pages 2371-2416, October.

    More about this item

    Keywords

    advertising; investor attention; insider sales; equity issues; Stock-financed mergers and acquisitions;

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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