Impact of Mad Money Stock Recommendations: Merging Financial and Marketing Perspectives

Abstract

This article relies on advertising and persuasive communications theories to uncover persistent variations in investor response to television stock recommendations targeting naive investors. The authors use an event study methodology to determine the size of the next-day abnormal market reaction to recommendations on Mad Money with Jim Cramer.Although viewers are actively looking for recommendations, the results show that any individual recommendation is still subject to many of the same communication challenges as traditional advertisements. A regression analysis finds that traditional advertising variables, such as message length, recency–primacy effects, information clutter, and source credibility, influence the size of the market reaction to a “buy” recommendation. The authors discuss implications for marketers, managers of public companies, and those interested in public policy aspects related to televised stock recommendations.

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