Media coverage of mutual funds

The principal focus of this dissertation is to investigate the role of media coverage in the investment decisions of mutual fund investors and the consequent effects on flows into the funds. I examine investor attention and learning effects by examining the relation between media coverage of mutual funds and the net investor flows to the funds. Using a database of nearly 10,000 news articles, I find that the existence and stance of media coverage affects net investor flows into the fund in ways consistent with investor attention and learning. Further, the media coverage does not have a uniform effect on flows. News articles with positive (negative) tones are associated with significant increases (decreases) in flows. I find that fund size and past performance influence the impact of media coverage on mutual fund flows. I also find that, as a fund ages and investors receive additional news about the fund, there are smaller effects from the news. This is consistent with the hypothesis that investors learn about funds through media coverage and that this knowledge affects their investment behavior. These results suggest that media coverage can have significant economic effects on mutual funds through the effects on investors' attention and learning.