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A test of the Behavioral versus the Rational model of Persuasion in Financial Advertising

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  • Riccardo Ferretti
  • Francesca Pancotto
  • Enrico Rubaltelli

Abstract

We present a test of the behavioral versus the rational model of advertising in the financial market. We analyze the Granger-causality relationship existing between Comit stock market index and advertising of financial products and services from the most important daily published financial newspaper in Italy. We run the test for both the risky and non-risky advertising, finding that the behavioral model of advertising is supported when risky financial products and services are considered, while the rational model is true for the non-risky. We ascribe this result to the dual process of reasoning: When investors evaluate the decision to buy risky nancial products and services, they activate the automatic, rapid decision making process. The behavioral model of advertising copes with it and provides an advertising strategy that responds to market evolutions. When non-risky financial products and services are considered, a di erent mental process, requiring slow and sequential reasoning, operates, compatibly with a rational decision making process.

Suggested Citation

  • Riccardo Ferretti & Francesca Pancotto & Enrico Rubaltelli, 2016. "A test of the Behavioral versus the Rational model of Persuasion in Financial Advertising," Centro Studi di Banca e Finanza (CEFIN) (Center for Studies in Banking and Finance) 0059, Universita di Modena e Reggio Emilia, Dipartimento di Economia "Marco Biagi".
    • Handle: RePEc:mod:wcefin:0059
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    References listed on IDEAS

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    6. Costanza Torricelli & Fabio Ferrari, 2022. "Climate Stress Test: bad (or good) news for the market? An Event Study Analysis on Euro Zone Banks," Centro Studi di Banca e Finanza (CEFIN) (Center for Studies in Banking and Finance) 0086, Universita di Modena e Reggio Emilia, Dipartimento di Economia "Marco Biagi".
    7. Massimo Baldini & Giovanni Gallo & Costanza Torricelli, 2017. "Past Income Scarcity and Current Perception of Financial Fragility," Centro Studi di Banca e Finanza (CEFIN) (Center for Studies in Banking and Finance) 17121, Universita di Modena e Reggio Emilia, Dipartimento di Economia "Marco Biagi".
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    10. Francesca Arnaboldi, Francesca Gioia, 2019. "Portfolio choice: Evidence from new-borns," Centro Studi di Banca e Finanza (CEFIN) (Center for Studies in Banking and Finance) 0078, Universita di Modena e Reggio Emilia, Dipartimento di Economia "Marco Biagi".
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    More about this item

    Keywords

    advertising; stock market index; behavioral model; dual process; Granger Causality;
    All these keywords.

    JEL classification:

    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising
    • O51 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - U.S.; Canada

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