Tweeting for Money: Social Media and Mutual Fund Flows

Abstract

We investigate whether asset management firms use social media to persuade investors. Combining a database of almost 1.6 million Twitter posts by U.S. mutual fund families with textual analysis, we find that flows of money to mutual funds respond positively to tweets with a positive tone. Positive tweets work best when they convey advice or views on the market and when investor sentiment is higher. Using a high-frequency approach, we identify a short-lived impact of families’ tweets on ETF share prices. Finally, we reject the alternative hypothesis that asset management companies use social media to alleviate information frictions.

Keywords: social media; Twitter; mutual fund families; mutual fund flows; machine learning; textual analysis.

JEL Classification: G11, G23, D83