Stocking up on Super Bowl Ads

Super Bowl ads cost $3 million per 30 seconds of air time. Do good commercials lead to good stocks?

The Super Bowl is the most watched TV event of the year. Does advertising during the Super Bowl justify its enormous cost? Kenneth Kim at the University of Buffalo examined 529 commercials that ran during 17 Super Bowls. He and his co-authors find that the stocks of the companies with the 10 most popular ads beat the S&P500 Index by 3% during the month after the Super Bowl. Beating the market by 3% over only one month's time is a lot! Only a small portion of that occurs on the first day or so after the game, so you still have time!

Still, is an extra 3% stock return worth the cost of the ads? A Super Bowl advertiser like Coke has a $99 billion market capitalization. So 3% of this is nearly $3 billion in added value. That sure seems worth it! Of course, if the ad is not one of the more popular ones, the effect is much smaller.

So who will it be this year?

• Will Jack In the Box stock (ticker: JACK) get off the ground, or will it just lie there?
• Will Coke stock (ticker: KO) fly away like the bees or will it be a big Zero?
• Will Denny's stock (ticker: DENN) be a grand slam or a strike out?

Will H&R Block stock (ticker: HRB) give you a refund, or death by taxes?

By the way, this effect can be explained by the representativeness bias. A similar price impact can be found in firms that change their name (see A Rose.com).

Reference: Charles Chang, Jing Jiang, and Kenneth A. Kim, 2009, "A test of the representativeness bias effect on stock prices: A study of Super Bowl commercial likeability," forthcoming, Economic Letters.