Note: this article addresses the effects of advertising on the consumer-like responses of individual investors. That is, it investigates the blurred line between a person’s responses to advertising as a consumer and as an investor.
Grant McQueen, Keith P. Vorkink, Eric D. DeRosia, and Glenn L. Christensen (2011), “Advertising, Visibility, and Stock Turnover,” Financial Management Association European Conference. Porto, Portugal.
ABSTRACT:
We further the understanding of cross-sectional differences in trading activity. Specifically, we link a firm’s visibility, as measured by advertising, to its stock turnover. First, we suggest three mechanisms (beyond simple awareness) capable of explaining how the repeated and consistent ads from well-known firms in the marketplace are linked to turnover. Second, using a data base of firms reporting advertising between January 1971 and December 2007, we regress average daily turnover within a year on annual ad spending for the year and find a positive and significant coefficient after controlling for extant determinants of turnover. Third, using a twenty year Super Bowl advertising event study, we again document a positive relationship between advertising and turnover.
– Eric DeRosia