We use mutual fund recommendations to test whether editorial content is independent from advertisers’ influence in the financial media. We find that major personal finance magazines (Money, Kiplinger’s Personal Finance, and SmartMoney) are more likely to recommend funds from families that have advertised within their pages in the past, controlling for fund characteristics like expenses, past returns and the overall levels of advertising. We find little evidence of a similar relationship for mentions in the New York Times or Wall Street Journal. Positive media mentions in both newspapers and magazines are associated with significant future inflows into the fund while advertising expenditures are not. Therefore, if we interpret our coefficients causally, a large share of the benefit of advertising in our sample of personal finance magazines comes via the apparent content bias. The welfare implications of this apparent bias are unclear, however, since our tests suggest that bias does not directly lead publications to recommend funds with significantly lower future returns than they might have recommended in the absence of any bias. In selecting funds to recommend, magazines overweight past returns relative to expenses, and as a group their recommendations do not outperform even an equal- weighted average of their peers. Nevertheless, this approach leaves magazines with large numbers of funds with high past returns from which to select, and so bias towards advertisers can be accommodated without significantly reducing readers’ future returns. Interestingly, the recommendations of Consumer Reports, which does not accept advertising, have future returns comparable to or below those of the publications which accept do advertising.
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References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Sendhil Mullainathan & Andrei Shleifer, 2005.
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Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)
Ulrike Malmendier & Geoffrey Tate, 2008.
"Superstar CEOs,"
NBER Working Papers
14140, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
Sendhil Mullainathan & Andrei Shleifer, 2005.
"Persuasion in Finance,"
NBER Working Papers
11838, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
Sendhil Mullainathan & Joshua Schwartzstein & Andrei Shleifer, 2006.
"Coarse Thinking and Persuasion,"
NBER Working Papers
12720, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
Other versions:
Matthew Ellman & Fabrizio Germano, 2004.
"What Do the Papers Sell?,"
Economics Working Papers
800, Department of Economics and Business, Universitat Pompeu Fabra, revised Feb 2006.
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