TV ads’ impact on retail investment

With Gamestop and AMC shares reaching frenzied pitch earlier this year, a new and powerful force in business announced itself: the retail investor – new research outlines how TV advertising influences this now key audience.

Why it matters

Investor relations – especially ahead of an IPO – are a part of marketing that doesn’t get a lot of airtime, falling as it does into a murky B2B marketing area. However, the rise of retail investors appears to be showing its mark as a predictable pattern has been revealed between investor exposure to TV ads and stock trading.

The research

The research, by Professor Jura Liqukonyte of Cornell University’s Charles H. Dyson School of Applied Economics and Management, and Almminas Zaldokas, an associate professor of Finance at Hong Kong University of Science and Technology uses the US’s multiple time zones to measure the delay between TV advertising and subsequent investor search activity.

One of the aspects to learn from is the study’s smart design, which used the three-hour lag between the East and West coasts to compare EST behaviour – those who have seen the ad – compared to PST behaviour – those who have not yet seen the ad.

Bottom line

The authors explain in their abstract their finding:

“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.”

What it means

The researchers find that, ultimately, marketing activity has some effect on stock trading volume (more investors hold after seeing an ad) and on investment-related searches not only for the advertiser but also often for competitors in the category.

Sourced from Management Science