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Internet search, fund flows, and fund performance

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  • Chen, Hong-Yi
  • Chen, Hsuan-Chi
  • Lai, Christine W.

Abstract

This study uses the Google search volume index as a direct measure of investor attention to explore the connection between attention-grabbing information and fund flows, future performance, and the survivorship of newly issued funds. We find that investors often engage in attention-driven purchases of new funds that have captured their attention online. However, fund investors who conduct internet searches and make attention-driven purchases are less sophisticated and fail to allocate their capital for earning abnormal returns. We also find that attention-induced inflows can help sustain new funds in competitive fund markets via potential mitigation of mergers and liquidations. Our robustness checks show similar results for old funds, but attention-driven fund flows do not enhance the survival of old funds.

Suggested Citation

  • Chen, Hong-Yi & Chen, Hsuan-Chi & Lai, Christine W., 2021. "Internet search, fund flows, and fund performance," Journal of Banking & Finance, Elsevier, vol. 129(C).
    • Handle: RePEc:eee:jbfina:v:129:y:2021:i:c:s0378426621001254
    DOI: 10.1016/j.jbankfin.2021.106166
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