Are Investment Portfolios Influenced by Media Attention?

ROCHESTER, N.Y., May 11, 2016 -- There's no doubt that attention from the media can have an enormous influence– just look at the media attention given to Donald Trump – currently valued at over $2 billion. But, can media attention influence an individual's investment decisions? According to new research from Simon Business School at the University of Rochester, the answer is a resounding, "YES!"

The study titled, "WSJ Category Kings – The Impact of Media Attention on Consumer and Mutual Fund Investment Decisions," explored the existence of a causal relationship between media attention and financial decision-making.

"Mutual funds are useful in exploring the impact of media attention on investment choices," said Ron Kaniel, Jay S. and Jeanne P. Benet Professor of Finance at Simon Business School and co-author of the study. "Our results show that following publication of the Wall Street Journal Category Kings lists, consumers not only "chase" published funds, but also change their attitude towards the entire fund brand."

Kaniel and his co-author, Robert Parham also from Simon Business School, show that a single mention of a fund in the prominent Wall Street Journal Category Kings ranking table, leads to an increase in quarterly capital flows, along with a significant overflow effect to other funds managed by the same company. A fund's presence on the Top 10 list means fund managers can collect almost $1.5 million in increased fees on average so there's ample reason for fund managers to respect the prominence of the Category Kings selection.

In fact, Kaniel's research shows that a month before the quarterly rankings comes out managers of funds at the number ten cutoff point often distort their portfolio allocation to differentiate themselves from their peers. The goal is to increase the likelihood of making the list. The gamble here is that while the fund shifts allocations into a sub-optimal risk-return profile, this approach also betters the chances of making the list and reaping significant rewards.

To learn more about the cutting-edge research being conducted at Simon Business School, please visit www.simon.rochester.edu.

About Simon Business School

The Simon Business School is currently ranked among the leading graduate business schools in the world in rankings published by the popular press, including Bloomberg Businessweek, U.S. News & World Report, and the Financial Times. The Financial Times recently rated the School No. 9 in the world for finance. More information about Simon Business School is available at www.simon.rochester.edu.

CONTACT: Charla Stevens Kucko, (585) 276-4806 or [email protected]
                         
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