Advertising, Visibility, and Stock Turnover

Abstract

We further the understanding of cross-sectional differences in trading activity. Specifically, we link a firm’s visibility, as measured by advertising, to its stock turnover. First, we suggest three mechanisms (beyond simple awareness) capable of explaining how the repeated and consistent ads from well-known firms in the marketplace are linked to turnover. Second, using a data base of firms reporting advertising between January 1971 and December 2007, we regress average daily turnover within a year on annual ad spending for the year and find a positive and significant coefficient after controlling for extant determinants of turnover. Third, using a twenty year Super Bowl advertising event study, we again document a positive relationship between advertising and turnover.

Keywords: stock turnover, advertising, visibility, behavioral finance, Super Bowl

JEL Classification: G14, G10, D83, C21