WSJ Category Kings - The Impact of Media Attention on Consumer and Mutual Fund Investment Decisions

57 Pages Posted: 30 Jan 2015 Last revised: 1 Dec 2017

Ron Kaniel

University of Rochester - Simon Business School; CEPR

Robert Parham

University of Virginia - McIntire School of Commerce

Multiple version iconThere are 2 versions of this paper

Date Written: November 18, 2015

Abstract

We exploit a novel natural experiment to establish a clear causal relation between media attention and consumer investment behavior. Our findings indicate a 31 percent 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 7 times larger than extra flows due to the well documented performance-flow relation. Other funds in the same complex receive substantial extra flows as well, especially in smaller complexes. There is no increase in flows when similar information is conveyed absent the prominence of the Category Kings lists. 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.

Keywords: mutual funds, media, visibility, flows, tracking error

JEL Classification: D12, D83, G02, G11, G14, G23

Suggested Citation

Kaniel, Ron and Parham, Robert, WSJ Category Kings - The Impact of Media Attention on Consumer and Mutual Fund Investment Decisions (November 18, 2015). Journal of Financial Economics (JFE), Vol. 123, No. 2, 2017; Simon Business School Working Paper No. FR 15-07. Available at SSRN: https://ssrn.com/abstract=2556627 or http://dx.doi.org/10.2139/ssrn.2556627

Ron Kaniel (Contact Author)

University of Rochester - Simon Business School ( email )

Rochester, NY 14627
United States

HOME PAGE: http://rkaniel.simon.rochester.edu

CEPR ( email )

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Robert Parham

University of Virginia - McIntire School of Commerce ( email )

P.O. Box 400173
Charlottesville, VA 22904-4173
United States

HOME PAGE: http://kn.owled.ge

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