Media and Investment Management
EDHEC Business School
Boston College - Carroll School of Management
March 24, 2012
This paper studies the relation between the media coverage of funds and their future performance. We classify news items about equity hedge funds over 1999--2008 into three source groups: General newspapers, Specialized magazines, and Corporate Communication. Examining post-exclusive-coverage performance, we document that Corporate-covered funds outperform and General-covered funds underperform, with a performance difference of about 11% annually. Applying a textual analysis to news items, we find that sentiment-related biases do not explain the inter-source return spread. Nevertheless, investor fund flow does not differentially respond to source-based information. The results suggest that the source-based return spread may reflect the extensive costs of processing information across thousands of media sources to generate alpha.
Number of Pages in PDF File: 32
Keywords: Media coverage, Hedge funds, Financial information, Asset pricing
JEL Classification: D80, G14, G20working papers series
Date posted: July 4, 2010 ; Last revised: March 26, 2012
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