May 20, 2020 - Economy

Some retail traders are taking cues from TV ads

A cluster of hanging TV screens

New research shows retail investors are also moved to make stock purchases by ads they see on TV.

What it means: In a new paper, researchers at Cornell and Hong Kong University of Science and Technology find a "predictable, recurring, and robust pattern between investor exposure to television commercials and subsequent retail stock trading."

  • And the impact of TV ads on stock prices is "more far reaching than previously believed."

Details: "Within 15 minutes of seeing an ad for a firm’s product or service, investors begin searching for financial information on that firm’s stock."

  • "This surge of attention leads to a higher trading volume of the advertiser’s stock the following day — and contributes to a temporary rise in the stock price of that firm."

The bottom line: "We found that each dollar spent on advertising translated to roughly 40 cents of additional trading volume in the advertiser’s stock."

Go deeper: The phenomenon of the television ad as investment tip

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