Super Bowl commercials might lead to buzz on Twitter
and help to build up a brand’s image, but they could also help boost a company’s performance in the stock market.
That’s the finding of a study released by researchers at Rice University’s Jones Graduate School of Business, who have concluded that publicly-traded companies who invest in big ad buys like the Super Bowl tend to see a rise in their common stock being traded.
“We’re fairly certain that the publicly-traded companies advertising on Sunday’s Super Bowl will see a spike in stock purchases,” said James Weston, a professor of finance and co-author of the study.
However, the type of investors are notable—they are expected to come from “everyday” investors and not frequent traders. Part of this is attributed to the age-old theory of “buying what you know,” and the study’s researchers believes this leads to a bias towards familiar stocks.
The paper ties this to the theory called “investor recognition hypothesis” that was initially expounded by economist Robert Merton in a 1987 paper, which puts forth the simple idea that investors want to be aware first of a firm’s general business before jumping in. Advertising, and especially in this day and age of mass media and social networks, only accentuate how investors come to first hear of a company. This then leads to the sudden urge to buy stocks in a firm who is a prominent part of an event like the Super Bowl.
“People buy on impulse and on recognition,” Weston said. “With more and more online trading taking place, companies that spend money on big advertising campaigns see this additional benefit from their advertising investment.”