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

• In Event: Investor Attention and the Role of IR

Abstract

Using daily data of actual firm advertisements we document a channel through which managers can influence investor attention. Exploiting evidence that firms often advertise at weekly intervals (i.e., every 7 days), we use an instrumental variables analysis to provide causal evidence that ads, especially in weekend and business publications, trigger temporary spikes in investor attention. We further find that ads in business publications trigger increased trading volumes and improved liquidity via greater quoted dollar depth. We contribute to research on both the consequences of advertising and more generally on determinants and financial market consequences of investor attention.

Authors

• Joshua Madsen, University of Minnesota

• Marina Niessner, Yale