Media Attention and Investment Decisions

Lambert here: IMNSHO, there’s one ginormous flaw in this paper that’s perhaps too obvious to note.

By Ron Kaniel, Jay S. and Jeanne P. Benet Professor of Finance, Simon School of Business, University of Rochester, and Robert Parham, PhD candidate in Finance, Simon Business School, University of Rochester. Originally published at VoxEU.

Correlations between media attention and capital flows to investment vehicles are well established. However, the question arises of whether this is due to new information conveyed or if it is just an artefact of the attention itself. This column employs fund rankings from the Wall Street Journal to investigate the issue. It shows that media attention does drive these investment decisions, even if no new information is conveyed. It further argues that financial intermediaries are aware of this effect and exploit it.




  • Media mentions cause increased capital flows;
  • But only when these mentions are prominently placed;
  • Even though the mentions convey no new information; and

Media Mentions and Capital Flows












Fund Managers’ Response to Incentives





Concluding Remarks












* * *

Lambert again: Let’s take the authors’ model, a bulleted list, and number it:

  1. Media mentions cause increased capital flows;
  2. But only when these mentions are prominently placed;
  3. Even though the mentions convey no new information; and

Surely we’re missing a step?

  1. Mutual fund managers plant puffery in the compliant press

And the increased capital flows (#4) are then skimmed to plant new stories (#0). It’s a virtuous cycle!

Of course, that would be fraud. Or a phishing equilibrium. And it be fair, capital flows fund advertising, too, as the authors point out. Nevertheless!

Print Friendly, PDF & Email
This entry was posted in Investment management, Market inefficiencies on by .

About Lambert Strether



  1. divadab

    Hmmm. SO not only is the market not efficient, “new information-free” publicity garners new investment. No wonder retail investors ALWAYS lag the market.

  2. Steve H.

    Limited sample size, but it sure seems like every time USA Today touts an investment it goes krunk about a week later and ends up on its face in the gutter.

    Not sure about the mechanism, could be an effect more like the shrimp on a cruise buffet. Tasty at first, then explosive decompression.

    1. craazyman

      I’ve never seen a shrimp explode. Are you trying to pull a fast one on us or what?

      1. Steve H.

        no no no, not a fast break. more a back door cut.

        to be clear, i’m referring to the alleged tendency of buffet shrimp to elicit disgustation in a manner similar to cruise ship vectored norovirus and i was trying to be o forget it.

        and to front back to what you previously said below, not only is that not your opinion, Kahneman’s quote on regression means that the first-quarter layup is likely to be interpreted as relevant to the fourth-quarter fall, which it may in fact be, but man muss immer umkehren good becomes bad and bad becomes good when overthinking future consequences. blowing up the apparent variance is what overmatched teams do when they’re desperately trying to get through single-elimination tournaments (no long term without the not-long term). does this mean being in the news is a harbinger of doom, regardless of the headline? Sports Illustrated referenced its own curse by putting a black cat on the cover.

        can there be a front without a back? is such thing as “‘information-free’ media” possible? how can I express the wonder which your writing elicits without collapsing those dimensions to a lesser inversion?

        1. craazyman

          you could try principal components analysis!

          You may be right about the shrimp. I was just posing a theoretical question. I know full well That Just because I’ve never seen a shrimp explode DOESN’T MEAN THEY CAN’T EXPLODE!

          That’s the point I guess of the post. If you’re a shrimp you need to risk the explosion iif you wanna be a lobster. But to me, frankly, those are animals and men are men. QED. :-)

  3. craazyman

    none of this makes any sense to me, if people didn’t pay attention to the back pages of the newspaper, why would the sports section always be there?

    also, with the internet nowdays there is no back pages. It’s confusing what’s front and what’s back. Nobody can tell anymore.

    that would tell me that publishers have no incentive to put sports pages on the back pages of the internet; this is a prediction that’s empirically verifiable. It’s not my opinion. anybody can see for themselves.

    Also, why would a mutual fund manager tweak their performance to get a high rank in quarter “n” if that jeopardized their chance for a high rank in quarter “n+1” or even “n+f” where f = some future quarter not very far away. maybe because they just like to go for the easy lay-up? I don’t know about that. also why would the authors say the manager is risking a performance fall by boosting tracking error when with equal probability they’re risking a performance rise. This is mathematically true, it’s not my opinion.

    but the biggest problem I see is the claim that being in the news brings you money. It depends on the news! hahahaha

    1. Synoia



      A: Pump and Dump.

  4. craazyman

    hellllooooooowww honkey town. what’s the matter you fkkers don’t like advanced math and explodiing shrimp? you jes wanna yack about Hillary and Trump? Oy Vey wada buncha noodle heads. That’s white people for ya. Only 9 comments and it’s already time to start drinking — Usually that’s luchhtime. You need to do your brainwork before the drinking or you can’t make the sense you need to make to be taken serously. One.five glasses of wine and thhat’s it for most of you.

    What’s a black man or a white man with a tan gonna say about 9 comments? YOu guys aren’t trying. There should be something said about symmetric probability distributions and expectation values for random variables. It should have been said by 8 a.m while youze still sober! Too late now. All this work gone to waste. wheres all th mathematicians and physics dudes who comment here. Don’t put the burden on me ’cause I’m only an amateur. You guys are pros. You can walk circles around me in polar coordinates. Who needs x^2 + y^2 = r. that’s for high school

    Bernie! Bernie! Bernie! He’d put these mutual fund fkkers on the ropes with one punch. All those dots in theh graph would be a HELL OF A LOT FLATTER, that’s for sure. Don’t blame Bernie if you don’t like exploding shrimp. WTF? It’s time all the lazy people do get their asses off the sofa and donate to Bernie. I donated $100 dollars. If I can do it, anybody can do it. Are you gonna talk about Hillary and Trump the rest of your fkking lives? I mean really.

    1. Clive

      You, as I have possibly reposted before, think you’ve got problems. Faced with an unenviable choice between sitting and watching one of the most awful TV series ever made while spending another weekend with my mother-in-law during which I am completely convinced that someone alters the space-time continuum, or trying to steer the conversation round to a discussion of anything other than what her cat is doing, I more-or-less forced her to read the article and the attached comments.

      Well, she said, after completing her way through yours above, that is why I do not read anything other than the Daily Mail (apart, she had to add, from the Telegraph on a Saturday but that is mainly to have something to put the cat litter tray on) because you don’t have to have run-ins with that sort of unsavoury person.

      I, for once, was in full agreement.

      1. craazyman

        well what did she think of the Post? Thats the main attraction. I’ve spent most of today reading probability theory and watching Borat videos on YouTube. Sasha Baron Cohen is amazing, an incredible talent. Your step mother should be careful when she reads the Telegraph online or she might accidently put the computer screen underneath the cat litter tray. honestly check out the Borat videos on YouTube and watch them with the Mum in Law! They’re hysterical.

        1. Clive

          The post? Oh, she said that she didn’t understand hardly a word of it and that’s why she leaves it all to the nice chap with the clean fingernails in Barclays Wealth Management to sort it all out He takes his shoes off when he comes in. He also gets a cup of tea in the good porcelain and a slice of her homemade fruit cake. And Munchkin likes him too (that’s the cat) and she’s a good judge of character.

          The Barclays guy skims a 5% fee off the funds under management whatever the underlying performance. Let’s face it, we’re in the wrong business.

          No, I daren’t show her any Borat stuff on YouTube.

        2. Skippy

          Its all about Lobb’s crazzyman… because not – all – is the same… but you can get most to believe it…

          Skippy…. at least in the former case I know the creator… personally…

    2. low integer


      If r is the radius then it’s x^2 + y^2 = r^2 (assuming the circle is centered at the origin of course).

      1. Steve H.

        if we’re talking circles, i’d actually like to bring up a point that has disturbed me for a long time.

        why is it pi times the Radius squared? when you take the volume of a sphere and collapse the dimensions, you get 4 pi r squared, and when you collapse that you don’t get 2 pi r.

        there has been an absolutist frame of reference perpetuated on western culture for millenia. all you have to do is use diameter and not radius, and the differentiations work perfectly. 1/6 pi d cubed collapses to pi d for a perimeter. but that requires recognizing that a circle has two sides, that the front is not the back. this frame was finally broken in 1948, when Claude Shannon advanced our knowledge a bit.

        1. low integer

          why is it pi times the Radius squared?

          If diameter is used, differentiation of the formula of the area of a circle will not yield the formula for the circumference of a circle. Likewise, differentiation of the formula for the volume of a sphere will not yield the formula for the surface area of a sphere if diameter is used.

          As far as I know, moving from 3D (sphere) to 2D (circle) is a projection transformation rather than a differential process, though I am not familiar with Claude Shannon’s work.

Comments are closed.