When a firm is the subject of a news story, its stock price is usually affected. Whether positive or negative, newly-publicized details attract investor attention and move the stock price based on the article’s sentiment. Research from the University of Georgia (UGA) Terry College of Business and published in the Journal of Marketing Research shows that two in-house tools can influence the effects of news reports on stock price: advertising and marketing capability. (Marketing capability refers to a firm’s capacity to understand consumers’ needs and influencers.)The study examined 141 firms over about five years, finding that when news reports highlighted positive news, firms with higher advertising levels experienced a stronger increase in their stock prices.“People have talked about the fact that investors tend to buy better-known stocks but nobody really talks about how that link happens,” said Sundar Bharadwaj, co-author of the paper and Coca-Cola Company chair professor of marketing at UGA. “When there’s good news and the company advertises that good news, we find that Google searches for the ticker symbol of the company go up but not for the company name. Unlike a big institutional buyer who is well aware of the symbol, it’s the individual buyer who searches for ticker symbol. So we can see that, all of a sudden, a lot more people are buying the stock.”When negative articles are published, however, advertising doesn’t mitigate the dysfunctional effects. In those instances, firms with strong marketing capability can better calm customer and investor fears and soften the detrimental impact of such news on stock price. The article cites an example of how McDonald’s quashed a rumor about overcharging minority customers by immediately taking to Twitter and other online forums to assure the public that the rumor was untrue.“Our contention is that if you have strong marketing capability, it’s important for you to let ...