Can Companies Influence Investor Behaviour through Advertising? Super Bowl Commercials and Stock Returns

Abstract

"Recent research shows that mood and attention may affect investors' choices. In this paper we examine whether companies can create such mood and attention effects through advertising. We choose a natural experiment by investigating price reactions and trading activity for firms employing TV commercials in 19 Super Bowl broadcasts over the 1969-2001 period. We find significant positive abnormal returns for firms which are readily identifiable from the ad contents, which is consistent with the presence of mood and attention effects. For recognisable companies with the number of ads greater than the sample mean, the event is followed by an average abnormal one day return of 45 basis points. The effect appears to persist in the short term with the 20-day post-event cumulative abnormal returns for such firms averaging 2%. We find significant abnormal net buying activity for small trades in shares of recognised Super Bowl advertisers indicating that small investors tend to be the ones most attracted by the increased publicity". Copyright Blackwell Publishers Ltd, 2005.

Low Risk and High Return - Affective Attitudes and Stock Market Expectations

“…We find that views on company image, brand and products carry over to investment expectations. This result supports Fehle, Tsyplakov, and Zdorovtsov (2005), who argue that firms can use advertising to impact investor behavior.…”

“…This is an important question since our previous results suggest that risk and return estimations of the firm's stock are influenced by investors' affective attitudes. Therefore, we now relate the affective rating of a firm to several variables that we believe to form affective attitudes towards this firm as well as several control variables: Fehle, Tsyplakov, and Zdorovtsov (2005) suggest that marketing actions can be used to influence investor behavior. Furthermore, experiences with a firm's products are likely to influence investors' affective attitudes and presumably also carry over to financial expectations.…”

Market Reaction to Second-Hand News: Attention Grabbing or Information Dissemination?

“…It is worth mentioning that Sant and Zaman (1996), though presenting an asymmetric reaction as well, find an opposite result with respect to the relation with the number of analysts: in their study, the positive abnormal market reaction at the time of the distribution of Business Week interests only the stocks followed by less than twenty analysts (ten for reports with analyst as a source), and the stocks of this group show a price reaction that increases as the number of analysts decreases. Our results support the evidence in Fehle, Tsyplakov and Zdorovtsov (2005) of a positive relation between the price reaction and the firm's notoriety. Instead, the presence of earnings forecast reduces abnormal returns and has no effect on abnormal volumes.…”

“…Seasholes and Wu (2004) find that unsophisticated investors are net buyers of stocks that the day before hit their daily upper price limit; they document a transitory impact on prices with reversion to pre-event levels within ten trading days. Fehle, Tsyplakov and Zdorovtsov (2005) study the attention-grabbing potential of the TV commercials in 19 Super Bowl broadcasts and show that recognisable companies (with a number of ads greater than the sample mean) experience a positive price reaction which persists in the 20-day post-event period.…”

Investors’ reactions to company advertisements: the persuasive effect of product-featuring ads

“…Second, brand likeability and positive brand equity (Fehle et al 2005;Mizik and Jacobson 2008) may also increase investors' aggregate valuation of the company's stock. Against this backdrop, a particularly interesting empirical question is, whether high preexisting brand recognition increases investment interest more than low brand likeability decreases it.…”