|
Advertising, Breadth of Ownership, and Liquidity,
with Gustavo Grullon and George Kanatas, Forthcoming at the Review of
Financial Studies.
|
|
We present
empirical evidence that investors buy familiar stocks and that this affects
firms’ breadth of ownership and stock market liquidity. Using product
market advertising as a measure of overall firm familiarity, we find that
firms that spend more on advertising, ceteris paribus, have a larger number
of both individual and institutional investors and better stock liquidity.
These findings are robust to a variety of methodological approaches and to
alternative measures of liquidity. Our results therefore suggest that
familiarity may affect the value of a firm through its effect on liquidity
costs.
|