Measuring the effect of Marketing: How do Super Bowl Ads affect Major Company Stock Returns?

Every year, major companies buy Super Bowl advertisements (‘ads’) to fuel growth through the creation of brand awareness among a large, diverse audience. Although measuring the effectiveness of these marketing tactics is difficult, evaluating the abnormal returns (‘alpha’) of company stocks in the five days following the Super Bowl is effective because it provides insight into how actual returns compare to expected returns (calculated using data from the preceding 250 days). Analysis of a comprehensive sample, which includes all Super Bowl ads for public companies between the years 2015 and 2019, accurately demonstrates the relationship between these returns, illustrating the effectiveness of this type of marketing. To account for variation resulting from different inputs in different financial models, it is important to evaluate alpha based on several, reputable models of expected return to best capture the result. In this study, alpha will be analyzed using the Capital Asset Pricing Model (‘CAPM’) and the Fama and French 3 and 5 factor models. Although the ideology that increased marketing improves stock returns through brand awareness suggests a positive alpha, these models all indicate a statistically significant negative alpha for large, public companies who bought Super Bowl ads over the past five years. Therefore, actual returns, on average, are lower than projected returns for the evaluated five-day window following the Super Bowl. In examining alpha and statistical significance according to these financial models, this thesis will explore different market factors that may explain this counterintuitive result, primarily focusing on the investors’ opinions about this type of marketing. Therefore, in researching various discrepancies contributing to the negative alpha result, this study will accurately assess the effectiveness of Super Bowl advertising in terms of stock performance.