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

"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.