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

Download or read book Is Investor Attention for Sale? The Role of Advertising in Financial Markets written by Joshua Madsen and published by . This book was released on 2019 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: Prior research documents capital market benefits of increased investor attention to accounting disclosures and media coverage, however little is known about how investors and markets respond to attention-grabbing events that reveal little nonpublic information. We use daily firm advertising data to test how advertisements, which are designed to attract consumers' attention, influence investors' attention and financial markets (i.e., spillover effects). Exploiting the fact that firms often advertise at weekly intervals, we use an instrumental variables approach to provide evidence that print ads, especially in business publications, trigger temporary spikes in investor attention. We further find that trading volume and quoted dollar depths increase on days with ads in a business publication. We contribute to research on how management choices influence firms' information environments, determinants and consequences of investor attention, and consequences of advertising for financial markets.