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WSJ Category Kings – The impact of media attention on consumer and mutual fund investment decisions

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  • Kaniel, Ron
  • Parham, Robert

Abstract

We exploit a novel natural experiment to establish a causal relation between media attention and consumer investment behavior, independent of the conveyed information. Our findings indicate a 31% local average increase in quarterly capital flows into mutual funds mentioned in a prominent Wall Street Journal “Category Kings” ranking list, compared to those funds which just missed making the list. This flow increase is about seven times larger than extra flows due to the well-documented performance-flow relation. Other funds in the same fund complex receive substantial extra flows as well, especially in smaller complexes. There is no increase in flows when the Wall Street Journal publishes similar lists absent the prominence of the Category Kings labeling. We show mutual fund managers react to the incentive created by the media effect in a strategic way predicted by theory, and present evidence for the existence of propagation mechanisms including increased fund complex advertising subsequent to having a Category King and increased efficacy of subsequent fund media mentions.

Suggested Citation

  • Kaniel, Ron & Parham, Robert, 2017. "WSJ Category Kings – The impact of media attention on consumer and mutual fund investment decisions," Journal of Financial Economics, Elsevier, vol. 123(2), pages 337-356.
  • Handle: RePEc:eee:jfinec:v:123:y:2017:i:2:p:337-356
    DOI: 10.1016/j.jfineco.2016.11.003
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    1. repec:bla:irvfin:v:16:y:2016:i:4:p:565-593 is not listed on IDEAS
    2. Jeffrey L. Hoopes & Leslie Robinson & Joel Slemrod, 2018. "Public Tax-Return Disclosure," NBER Working Papers 24318, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    Mutual funds; Investor attention; Incentives; Flows; Regression discontinuity;

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • 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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