Is It All Noise?  The Microstructure Implications of Corporate Recurring Advertisements

Vivian W. Fang, Joshua Madsen, and Xinyuan Shao

♦ This paper studies the market microstructure implications of uninformed trading volume. We capture uninformed volume using spikes in retail trading triggered by weekly advertisements in the Wall Street Journal that are largely duplicates. We report three findings. First, consistent with a positive volume-volatility relation, stock price volatility amplifies on recurring ad days. Second, informed investors time liquidity to trade more aggressively on recurring ad days. Third, despite the increase in informed trading on such days, price impact is lower, yielding a negative volume-price impact relation. Collectively, the evidence supports the theoretical predictions of Collin-Dufresne and Fos (2016).

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