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Winners in the spotlight: Media coverage of fund holdings as a driver of flows

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  • Solomon, David H.
  • Soltes, Eugene
  • Sosyura, Denis

Abstract

We show that media coverage of mutual fund holdings affects how investors allocate money across funds. Fund holdings with high past returns attract extra flows, but only if these stocks were recently featured in the media. In contrast, holdings that were not covered in major newspapers do not affect flows. We present evidence that media coverage tends to contribute to investors׳ chasing of past returns rather than facilitate the processing of useful information in fund portfolios. Our evidence suggests that media coverage can exacerbate investor biases and that it is the primary mechanism that makes fund window dressing effective.

Suggested Citation

  • Solomon, David H. & Soltes, Eugene & Sosyura, Denis, 2014. "Winners in the spotlight: Media coverage of fund holdings as a driver of flows," Journal of Financial Economics, Elsevier, vol. 113(1), pages 53-72.
    • Handle: RePEc:eee:jfinec:v:113:y:2014:i:1:p:53-72
    DOI: 10.1016/j.jfineco.2014.02.009
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    References listed on IDEAS

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    More about this item

    Keywords

    Media; Mutual funds; Capital flows; Fund holdings; Return chasing;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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