A new study shows that TV commercials can have a real-time effect on investor behavior, according to a recent article in The Wall Street Journal.
Researchers found that “TV ads create an immediate—and unexpected—spike in curiosity among individual investors” which leads to a slight bump in trading activity in the advertiser’s stock.
Specifically, the study shows that within 15 minutes after a commercial has aired, there is on average a 3% uptick in queries to the SEC’s Edgar database of company filings and an 8% increase in Google searches. The study also found that this activity was accompanied on the following day by a slight increase in trading activity in that company’s stock. “According to the researcher’s calculations,” the article reports, “such an increase means that each dollar invested in TV advertising can generate roughly 40 cents of trading activity.”
The study used data from nearly 327,000 TV ads for by 301 publicly listed companies that aired between 2015 and the first quarter of 2017 on five major television networks.
The numbers are significant, according to one of the study’s authors, Jura Liaukonyte (associate professor at Cornell’s Charles H. Dyson School of Applied Economics and Management), who said that TV ads were not thought to have such an impact on trading. The study showed that the biggest impact among investors arose from the financial and pharmaceutical sectors.
Of the study results, Liaukonyte asserted, “We’ve been able to show this completely unintended effect,” she said, adding, “If I were to guess, most of the firms don’t know about this.”