Advertising, Attention, and Financial Markets

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.

Keywords: Advertising, Investor Attention, Wikipedia, Turnover, Liquidity, Returns

JEL Classification: G10, G12, G14, M37, G40

Suggested Citation: Suggested Citation

Focke, Florens and Ruenzi, Stefan and Ungeheuer, Michael, Advertising, Attention, and Financial Markets (August 19, 2019). Review of Financial Studies, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2544294 or http://dx.doi.org/10.2139/ssrn.2544294