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Background Noise? TV Advertising Affects Real-Time Investor Behavior

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  • Jūra Liaukonytė

    (Cornell University, Ithaca, New York 14850)

  • Alminas Žaldokas

    (Hong Kong University of Science and Technology, Hong Kong)

Abstract

Using minute-by-minute TV advertising data covering some 300 firms, 327,000 ads, and $20 billion in ad spending, we study the real-time effects of TV advertising on investors’ searches for online financial information and subsequent trading activity. Our identification strategy exploits the fact that viewers in different U.S. time zones are exposed to the same programming and national advertising at different times, allowing us to control for contemporaneous confounding events. We find that an average TV ad leads to a 3% increase in EDGAR (Electronic Data Gathering, Analysis, and Retrieval) system queries and an 8% increase in Google searches for financial information within 15 minutes of the airing of that ad. These searches translate into larger trading volume on the advertiser’s stock, driven primarily by retail investors. The findings on retail investor ad-induced trading are corroborated with hourly data from Robinhood, a popular retail trading platform. We also show that ads induce searches and trading of companies other than the advertiser, including of close rivals. Altogether, our findings suggest that advertising originally intended for consumers has a nonnegligible effect on financial markets.

Suggested Citation

  • Jūra Liaukonytė & Alminas Žaldokas, 2022. "Background Noise? TV Advertising Affects Real-Time Investor Behavior," Management Science, INFORMS, vol. 68(4), pages 2465-2484, April.
    • Handle: RePEc:inm:ormnsc:v:68:y:2022:i:4:p:2465-2484
    DOI: 10.1287/mnsc.2021.4003
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    References listed on IDEAS

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    4. Kryzanowski, Lawrence & Rouhghalandari, Ali, 2024. "Institutional/retail investor active attention and behavior: Firm coverage on Mad Money," Journal of Behavioral and Experimental Finance, Elsevier, vol. 42(C).
    5. Clor-Proell, Shana & MacKenzie, Nikki & Rennekamp, Kristina & Rupar, Kathy, 2023. "Invest in what you know? How customer investors react to corporate restatements," Accounting, Organizations and Society, Elsevier, vol. 111(C).
    6. Jiang, Fuxiu & Shen, Yanyan & Xia, Xiaoxue, 2024. "The spillover effect of advertising on the capital market: Evidence from financial constraints111 Fuxiu Jiang acknowledges the financial support from the China National Natural Science Foundation (Nos," Journal of Corporate Finance, Elsevier, vol. 84(C).
    7. Jie Jiao & Yanyang Wang & An Yan, 2024. "Corporate social responsibility and investor relationship management," The Financial Review, Eastern Finance Association, vol. 59(3), pages 657-685, August.

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