What Do Investors Learn from Advertisements?

Individual investors use advertisements to make investment decisions. We test how advertising content affects investor's knowledgeability and evaluation of an equity offering. The results show that persuasive content (e.g. images) increases investor knowledgeability about fundamental characteristics of securities offerings while salient disclosure of risk factors only increases risk factor knowledge. Persuasive content also increases average investment amounts by 16 percent, while salient risk factor disclosure reduces the tendency to consult additional information. Our results are robust against differences in financial literacy and investor experience and provide insights for regulating investment marketing