Investor sentiment plays an important role, affecting firm level advertising expenditures. We provide evidence that financially constrained firms exhibit lower advertising investment-cash flow sensitivity and higher advertising investment-q sensitivity during high sentiment periods. The patterns are driven mainly by those firms facing financial constraints. More importantly, we identify several product features that also affect advertising investment sensitivities. Sorting on product features generates investment sensitivities that closely resemble those of sorting on financial constraint measures. We design empirical analyses to provide clean tests of the cost-ofexternal-financing-based and product-feature-based explanations underlying the variation in advertising investment sensitivities.

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