Researchers found that searches for companies’ financial information increased in the minutes after their TV ad was aired
Advertising and marketing are crucial components of growing business but are retail investment decisions influenced by these messages?
Of course, seeing an investment firm’s commercial messaging would be expected to drive consumer action as with any product or service, but researchers from Cornell University looked into whether seeing advertising from a brand would prompt investor interest.
They found that advertising is one of the most noteworthy influences behind retail stock investing.
In their study, they found that searches rose for financial information about a company 15 minutes after their commercial appeared on TV. There was a 3% gain in searches on the SEC’s Edgar database of corporate filings and an 8% rise in Google searches.
The correlation was particularly strong for financial services, pharmaceutical, and consumer staples sectors.
In an additional study, they found that holders of shares in specific companies on online trading platform Robinhood increased by an average 24% in the hour following that firm’s TV commercial airing. This was even higher (29%) when the advertising was within a live program such as a sporting event.
“The evidence presented in our paper suggests that the advertising effect on investor actions is more immediate and far-reaching than has previously been documented,” said Jura Liaukonyte, the Dake Family Associate Professor at the Charles H. Dyson School of Applied Economics and Management. “The advertising-induced trading volume is less than 1% of the advertiser’s stock on a given day, but this increase is notable and isn’t an insignificant number.”
Interestingly, Liaukonyte and co-authors found that investor interest also increased for the advertisers’ closest competitors following the airing of the TV commercial.
The takeaway
The research, published in the journal Management Science, suggests that firms could do well by increasing their advertising following strong financial results – or even after their rivals’ results – to drive more interest in their stock.
