Winners in the Spotlight: Media Coverage of Fund Holdings as a Driver of Flows

42 Pages Posted: 30 Sep 2011 Last revised: 12 Sep 2013

David H. Solomon

Boston College - Carroll School of Management

Eugene F. Soltes

Harvard Business School

Denis Sosyura

Arizona State University

Date Written: September 11, 2013

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.

Keywords: media, attention, mutual funds, window-dressing

JEL Classification: G11, G14

Suggested Citation

Solomon, David H. and Soltes, Eugene F. and Sosyura, Denis, Winners in the Spotlight: Media Coverage of Fund Holdings as a Driver of Flows (September 11, 2013). Journal of Financial Economics (JFE), Forthcoming. Available at SSRN: https://ssrn.com/abstract=1934978 or http://dx.doi.org/10.2139/ssrn.1934978

David H. Solomon

Boston College - Carroll School of Management ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

Eugene F. Soltes

Harvard Business School ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

Denis Sosyura (Contact Author)

Arizona State University ( email )

Tempe, AZ 85287-3706
United States

HOME PAGE: http://www.public.asu.edu/~dsosyura/

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