Winners in the spotlight: Media coverage of fund holdings as a driver of flows

Solomon, David; Soltes, Eugene F.; Sosyura, Denis

doi:10.1016/j.jfineco.2014.02.009

Cited by 286 publications

(103 citation statements)

References 47 publications

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“…Similarly, Korkeamaki et al (2007) showed that advertising, together with past performance, significantly attracted fund inflows. Other studies have found positive relationships between mutual fund flows and mutual fund advertising expenditures (Gallaher et al, 2005), as well as between fund flows and media coverage (Kaniel and Starks, 2007;Solomon et al, 2014). These findings are consistent with observations of investors' limited attention and with salience effects (Daniel et al, 2002).…”

Section: The Role Of Investor Attentionsupporting

confidence: 86%

Do investors show an attentional bias toward past performance? An eye-tracking experiment on visual attention to mutual fund disclosures in simplified fund prospectuses

Hüsser

Wirth

2014

J Financ Serv Mark

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His research focus on media psychology and media effects, persuasion, emotions, and empirical methods in the field of political communication, mobile communication, online communication and financial communication.ABSTRACT This study examines the cognitive processes underlying investors' extrapolations of past fund performance and whether investors' attention patterns may explain their return-chasing behaviors. We measured the attention that investors paid to mutual fund disclosures in a simplified fund prospectus using unobtrusive infrared eye tracking. Results suggest that prior fund performance, which is normatively irrelevant information and not useful in predicting future performance, received considerable attention from investors. More interestingly, the impact of prior fund performance on investors' purchasing intentions was fully mediated through expected returns and attention paid to past performance information. The results indicate that investors apparently believe in performance persistence or in a 'hot hand' effect, and that mutual fund purchases are driven by salient information such as superior performance. Moreover, we tested the disclaimer mandated by regulatory bodies, which warns that past performance does not guarantee future results. We found that the disclaimer was ineffective in reducing investors' extrapolation biases, despite the fact that the disclaimer was attended to and properly encoded by investors.

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Section: The Role Of Investor Attentionsupporting

confidence: 86%

Do investors show an attentional bias toward past performance? An eye-tracking experiment on visual attention to mutual fund disclosures in simplified fund prospectuses

Hüsser

Wirth

2014

J Financ Serv Mark

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“…Conversely, the salience view argues that media coverage directs investors' attention to particular financial assets (Solomon et al, 2012). Thus, if companies are covered more intensely in the media, investors' demand for their stocks is higher (e.g., Daniel et al, 1998, Solomon et al, 2012. For instance, Da et al (2011) proposed Internet search demand for stock symbols as a new indicator to analyze investor attention.…”

Section: Twitter As An Information Intermediarymentioning

confidence: 99%

News or Noise? Using Twitter to Identify and Understand Company‐specific News Flow

Sprenger¹,

Sandner²,

Tumasjan³

et al. 2014

Business Fin & Account

139

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This study presents a methodology for identifying a broad range of real-world news events based on microblogging messages. Applying computational linguistics to a unique dataset of more than 400,000 S&P 500 stock-related Twitter messages, we distinguish between good and bad news and demonstrate that the returns prior to good news events are more pronounced than for bad news events. We show that the stock market impact of news events differs substantially across different categories.

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“…A well established finding in this literature postulates that fund flows respond strongly to past performance. 3 Other determinants of fund flows examined include fund size (e.g., Sirri andTufano 1998), fund ratings (e.g., Del Guercio andTkac 2008), the presence of a star fund within the family (e.g., Nanda et al 2004), media coverage (e.g., Solomon et al 2014), advertisements (e.g., Jain and Wu 2000), and fees (e.g., Barber et al 2005), among others. Sialm et al (2015) show that plan sponsors' monitoring of defined contribution plans' available options leads to relatively more volatile fund flows that respond stronger to past performance.…”

Section: Introductionmentioning

confidence: 99%

Can Mutual Fund Investors Distinguish Good from Bad Managers?

Dyakov

Verbeek

2018

Int Rev Finance

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Mutual fund flows respond significantly to the return gap, which captures information about unobserved actions of mutual funds and predicts future performance. The sensitivity of fund flows to the return gap is: (i) strong and positive; (ii) increasing with investor sophistication; (iii) highly nonlinear; and (iv) decreasing with the informativeness of past fund returns. On average, the response of investors to the return gap enhances their performance. Our findings suggest there is a sophisticated mass of investors who can distinguish good from bad managers using information that may not be directly inferred from standard performance indicators.

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Winners in the spotlight: Media coverage of fund holdings as a driver of flows

Cited by 286 publications

References 47 publications

Do investors show an attentional bias toward past performance? An eye-tracking experiment on visual attention to mutual fund disclosures in simplified fund prospectuses

Do investors show an attentional bias toward past performance? An eye-tracking experiment on visual attention to mutual fund disclosures in simplified fund prospectuses

News or Noise? Using Twitter to Identify and Understand Company‐specific News Flow

Can Mutual Fund Investors Distinguish Good from Bad Managers?

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