Corporate Advertising, Trading, and Volatility

50 Pages Posted: 2 Nov 2018 Last revised: 8 Jan 2022

See all articles by Vivian W. Fang

Vivian W. Fang

University of Minnesota - Twin Cities - Carlson School of Management; European Corporate Governance Institute (ECGI)

Joshua Madsen

University of Minnesota - Twin Cities - Carlson School of Management

Xinyuan Shao

University of Minnesota - Twin Cities - Carlson School of Management

Date Written: January 6, 2022

Abstract

This paper studies patterns of retail trading surrounding corporate advertisement (ad) days
and implications for secondary markets. We report three findings. First, consistent with
advertising rigidity, retail trading spikes seven days after firms advertise in the Wall Street
Journal, but such trading is likely uninformed as image analysis shows that most weekly
ads are duplicates. Second, consistent with a positive volume-volatility relation, recurring
ads increase retail trading volatility, which in turn amplifies stock price volatility. Third,
informed stock and option traders appear to take advantage of increases in retail trading and
volatility on recurring ad days to trade more aggressively.

Keywords: Advertising, Retail Trading, Price Volatility, Informed Trading, Image Analysis

JEL Classification: G10, G12, G14, G23, M37

Suggested Citation

Fang, Vivian W. and Madsen, Joshua and Shao, Xinyuan, Corporate Advertising, Trading, and Volatility (January 6, 2022). Available at SSRN: https://ssrn.com/abstract=3271851 or http://dx.doi.org/10.2139/ssrn.3271851

Vivian W. Fang (Contact Author)

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

19th Avenue South
Minneapolis, MN 55455
United States

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Joshua Madsen

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

19th Avenue South
Minneapolis, MN 55455
United States

Xinyuan Shao

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

19th Avenue South
Minneapolis, MN 55455
United States

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