Where is the Intersection of Madison Avenue and Wall Street? Advertisement, Local Access to Investment Advice, and Stock Market Participation

Abstract

Exploiting variation in household exposure to financial advertising along Designated Market Area (DMA) borders, we find increased advertising by investment advisory firms leads to greater stock market participation. Importantly, this relationship between participation and advertising intensity is concentrated in those areas where the advertising firm maintains a physical presence, and unlike advertising in other industries, we find limited evidence of between-firm spillovers. We document larger effects in areas of low prior advertising and low community trust suggesting advertising’s role in both building awareness and trust.  Our findings highlight the complementary nature of persuasive advertising and local access to financial advice.

Keywords: Stock market participation, Advertising, Trust, Local Access to Finance, Investment advisers

JEL Classification: D14, G24, L84, M37, G20