Is Investor Attention for Sale? The Role of Advertising in Financial Markets

60 Pages Posted: 8 Oct 2014 Last revised: 13 Feb 2019

See all articles by Joshua Madsen

Joshua Madsen

University of Minnesota - Twin Cities - Carlson School of Management

Marina Niessner

AQR Capital Management, LLC

Multiple version iconThere are 2 versions of this paper

Date Written: January 8, 2019

Abstract

Prior research documents capital market benefits of increased investor attention to accounting disclosures and media coverage, however little is known about how investors and markets respond to attention-grabbing events that reveal little nonpublic information. We use daily firm advertising data to test how advertisements, which are designed to attract consumers' attention, influence investors' attention and financial markets (i.e., spillover effects). Exploiting the fact that firms often advertise at weekly intervals, we use an instrumental variables approach to provide evidence that print ads, especially in business publications, trigger temporary spikes in investor attention. We further find that trading volume and quoted dollar depths increase on days with ads in a business publication. We contribute to research on how management choices influence firms' information environments, determinants and consequences of investor attention, and consequences of advertising for financial markets.

Keywords: Advertising, Investor Attention, Financial Markets, Earnings Announcements

JEL Classification: G12, G14

Suggested Citation

Madsen, Joshua and Niessner, Marina, Is Investor Attention for Sale? The Role of Advertising in Financial Markets (January 8, 2019). Journal of Accounting Research, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2506872 or http://dx.doi.org/10.2139/ssrn.2506872

Joshua Madsen

University of Minnesota - Twin Cities - Carlson School of Management ( email )

19th Avenue South
Minneapolis, MN 55455
United States

Marina Niessner (Contact Author)

AQR Capital Management, LLC ( email )

Greenwich, CT
United States

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