ADVERTISING TO INVESTORS - THE EFFECT OF FINANCIAL-RELATIONS ADVERTISING ON STOCK VOLUME AND PRICE

Financial-relations advertising is a major type of corporate advertisi ng, yet little research has addressed its effectiveness. The authors u se a time-series approach to study the effect of financial-relations a dvertising on stock trading volume and stock price. They find increase s in trading volume at the initial appearance of a financial-relations advertisement, but not during subsequent appearances of the ad. Furth er, these increases occur mainly for small capitalization firms. No su pport is found for the view that this type of advertising positively a ffects stock prices, at least in the short run. Although financial-rel ations advertising may change the expectations of individual investors , such advertising does not appear to change the market's view of a st ock.