Super Bowl Advertisers See Stock Price Rise

Cornell University's School of Hotel Administration and the University at Buffalo School of Manageme

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. January 27, 2009

ITHACA / BUFFALO, NY, January 27, 2009 - Companies that advertise during the Super Bowl can count on an immediate bump in their stock price, according to a study by researchers at Cornell University's School of Hotel Administration and the University at Buffalo School of Management. The study found that on average these companies will see their stock outperform the market by more than 1.5 percent in the 20 days after the game.

Researchers examined 529 commercials that aired during 17 Super Bowls from 1989-2005. They used ratings gathered by USA Today's Ad Meter, which tracks in real time how consumers react to each commercial. Researchers say that these investors appeared to use a mental short cut known as 'representativeness bias.' This means that in choosing to invest in these firms, investors made an irrational judgment about how a single event might influence its stock price.

'We deem this reaction to be irrational because the stock returns were based solely on how investors reacted to the commercials, rather than on any performance-based criteria,' says Charles Chang, assistant professor of finance in Cornell's School of Hotel Administration. 'These responses occurred regardless of whether the commercials had any subsequent effect on future revenues.'

The study also found that companies with the best commercials had slightly better returns. Companies that aired the top 10 most liked commercials each year outperformed the bottom 10 advertisers by nearly 2 percent in the 20 days after the game.

Chang pointed out that the increase in market value often offsets the cost of advertising. Citing an example, an advertiser with a market cap of $80 billion would experience a $1.2 billion increase in market value, more than enough to cover the most expensive commercial airtime for the game.

Chang collaborated on the study with Kenneth A. Kim, associate professor of finance in the UB School of Management and Jing Jiang, a doctoral student in the UB School of Management. The study will be published in an upcoming edition of the journal, Economics Letters.

About The Center for Hospitality Research

A unit of the Cornell School of Hotel Administration, The Center for Hospitality Research (CHR) sponsors research designed to improve practices in the hospitality industry. Under the lead of the center's 73 corporate affiliates, experienced scholars work closely with business executives to discover new insights into strategic, managerial and operating practices. The center also publishes the award-winning hospitality journal, the Cornell Hospitality Quarterly (formerly the Cornell Hotel and Restaurant Administration Quarterly). To learn more about center and its projects, visit www.chr.cornell.edu.