Do stock prices undervalue investments in advertising?

Yun Kyung Oh, Huseyin Gulen, Jung Min Kim, William T. Robinson

Research output: Contribution to journalArticlepeer-review

7 Scopus citations


Under the efficient market hypothesis, the stock price incorporates the full value of a firm’s advertising. If so, advertising spending should not be associated with future abnormal stock returns. Nevertheless, from 1995 to 2015, advertising spending often leads to abnormal stock returns the following year. The strongest results surface for consumer goods and services where advertising used to build brand equity can carryover from one year to the next. No significant differences arise for healthcare, industrial goods, or retailer advertising. Healthcare and industrial goods advertising is often modest. Retailer advertising that builds traffic should have little if any carryover into the following year. These results may help marketing managers defend an advertising budget whose benefits carryover into the following year, but hurt current profits. Having more investment analysts on Wall Street with a marketing background should help reduce this overly conservative “wait and see” discount for carryover advertising.

Original languageEnglish
Pages (from-to)611-626
Number of pages16
JournalMarketing Letters
Issue number4
StatePublished - 1 Dec 2016


  • Abnormal stock returns
  • Carryover advertising
  • Firm advertising
  • Marketing-finance interface


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