Does Media Coverage of Stocks Affect Mutual Funds’ Trading and Performance?
Forthcoming in Review of Financial Studies
42 Pages Posted: 18 Mar 2010 Last revised: 25 Sep 2014
Date Written: August 31, 2014
We study the relation between mutual fund trades and mass media coverage of stocks. We find that funds exhibit persistent differences in their propensity to buy media-covered stocks. Moreover, this propensity is negatively related to their future performance. Funds in the highest propensity decile underperform funds in the lowest propensity decile by 1.1% to 2.8% per year. These results do not extend to fund sells, likely because of funds’ inability to sell short. Overall, the findings suggest that professional investors are subject to limited attention.
Keywords: mutual fund, performance, stock, media coverage, limited attention, investor behavior
JEL Classification: G11, G20, G23
Suggested Citation: Suggested Citation