My name is Jura Liaukonyte and I'm the Dake Family Associate Professor at Dyson School at Cornell University, and my research is at the intersection of marketing and applied economics, particularly the sub-field called industrial organization.
I would call the general theme of my research as the economics of advertising and information, and under this umbrella, I focus on questions such as: "what are the effects of advertising and its content?" and "what is the impact of information and information framing, both for consumers and firms?" My recent papers have addressed the effects of advertising on investor behavior, the unexpected fairness concerns due to price personalization, and then various effects of food labels on consumer choice.
In this paper my co-author Alminas Zaldokas and I find a predictable pattern between investor exposure to TV ads and then subsequent retail stock trading, and specifically, we find that within 15 minutes of the TV ads airing, there's a spike in the search for advertisers' financial information on the US Security Exchange Commission's website.
We take advantage of the three-hour lag between the east and west coast for airing the same ads during the same shows on national TV, so that is: we can compare the behavior of investors in the east coast when they see the ad and then with the simultaneous behavior of investors in the west coast who have not yet seen the ad.
So, let's take this Apple iPhone ad as an example. This ad aired on a popular TV show, not too long after iPhone 7 released, so first this ad airs on the east coast, right? So we look at the traffic right after the ad, we see a spike in searches that is coming from the east coast IP addresses, but we do not see anything like that coming from the west coast IP addresses.
So now, let's look at what is happening three hours later, when the same ad airs on the west coast. Here we find that there's no traffic change in the east coast, right, as we would expect, but there is a significant bump in the west coast.
So then we ask the question-- whether these increased searches for financial information translate to changes in trading pattern, and the answer is yes.
Yes, there seems to be an increase in the number of Robinhood investors holding the advertiser stock immediately after the firm advertises on national TV.
So what we think is even more interesting is that the TV ad effect isn't just confined to the advertiser itself, but it also spreads to other firms-- advertisers' closest competitors or suppliers.
But sometimes there are also these seemingly unrelated companies, so we think that more work is needed to really understand how retail investors' minds work.
So first, we believe we documented an effect that is unintended --it's good but it's unintended-- and likely has been intuited by firms but really not known, but now has been really shown cleanly causally.
Also, based on the interest from investment banks and hedge funds that this paper has already received, we know that trading strategies can be adjusted to exploit this noise trading coming from retail investors that we document.
In a larger scheme of things, what this research is saying is that CMOs and CFOs should really not sit in their own silos separately and they should come together and should try to understand better how marketing actions affect financials and vice versa.
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Professor Jura Liaukonyte discusses her research on the economics of advertising and information, recently on the effects of advertising on investor behavior.