Do Ads Influence Editors? Advertising and Bias in the Financial Media

29 Pages Posted: 7 Nov 2004

See all articles by Jonathan Reuter

Jonathan Reuter

Boston College - Department of Finance; National Bureau of Economic Research (NBER)

Eric Zitzewitz

Dartmouth College; NBER

Date Written: August 17, 2005

Abstract

The independence of editorial content from advertisers' influence is a cornerstone of journalistic ethics. We test whether this independence is observed in practice. We find that mutual fund recommendations are correlated with past advertising in three personal finance publications but not in two national newspapers. Our tests control for numerous fund characteristics, total advertising expenditures, and past mentions. While positive mentions significantly increase fund inflows, they do not successfully predict returns. Future returns are similar for the funds we predict would have been mentioned in the absence of bias, suggesting that the cost of advertising bias to readers is small.

Note: Downloadable document is in Spanish.

Keywords: Advertising, media bias, mutual funds, portfolio choice, expert opinion, buy and sell recommendations

JEL Classification: G11, L15, M37

Suggested Citation

Reuter, Jonathan and Zitzewitz, Eric W., Do Ads Influence Editors? Advertising and Bias in the Financial Media (August 17, 2005). AFA 2005 Philadelphia Meetings, Available at SSRN: https://ssrn.com/abstract=614583 or http://dx.doi.org/10.2139/ssrn.614583

Jonathan Reuter (Contact Author)

Boston College - Department of Finance ( email )

Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Eric W. Zitzewitz

Dartmouth College ( email )

Hanover, NH 03755
United States
603-646-2891 (Phone)
603-646-2122 (Fax)

HOME PAGE: http://www.dartmouth.edu/~ericz

NBER ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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