Advertising to Investors: The Effect of Financial-Relations Advertising on Stock Volume and Price

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Abstract
Financial-relations advertising is a major type of corporate advertising, yet little research has addressed its effectiveness. The authors use a time-series approach to study the effect of financial-relations advertising on stock trading volume and stock price. They find increases in trading volume at the initial appearance of a financial-relations advertisement, but not during subsequent appearances of the ad. Further, these increases occur mainly for small capitalization firms. No support is found for the view that this type of advertising positively affects stock prices, at least in the short run. Although financial-relations advertising may change the expectations of individual investors, such advertising does not appear to change the market's view of a stock.

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