Research Insights: The Other Audience for Product Advertising: Wall Street

When major brands launch Super Bowl ads, viewers assume the target is consumers. But can advertising provide signals to an entirely different audience—Wall Street financial analysts—and, through their forecasts, inform investor decisions?

Hao Zhang, finance professor and BS-Finance and MS-Finance program director, and coauthors examine it in their 2025 Journal of Accounting and Public Policy paper, “Product advertising and financial analyst forecasts.”

To understand why product advertising matters to stock analysts, consider their tasks. Predicting a company’s future earnings requires understanding qualitative signals: Is a new product line gaining traction? How aggressively is management expanding into new markets?     

In this interdisciplinary study, Zhang and coauthors examine the effect of advertising intensity on analysts’ forecast informativeness and accuracy, and find a positive relationship. A study of 1997 pharmaceutical advertising deregulation provides causal evidence.

By illuminating how analysts translate product-market information into forecasts, the study addresses a fundamental interdisciplinary question: How do product markets influence capital markets?

One particularly revealing finding concerns the role of expertise. The positive relationship between advertising and forecast quality is stronger for firms followed by more industry-expert analysts or those registering new trademarks, suggesting domain knowledge helps analysts interpret promotional signals. 

Advertising is public information, but its financial relevance is not equally apparent to every observer. This is where the study’s marketing and financial-analysis perspectives come together: While understanding the marketing message is only part of the task, assessing what it means for the company and its further performance requires financial and accounting expertise.

Marketing communications may inform investors’ trading decisions indirectly, although they target consumers. Managers should recognize advertising’s broader informational reach. 

View the paper published by the Journal of Accounting and Public Policy in 2025, “Product advertising and financial analyst forecasts.”