Winners in the Spotlight: Media Coverage of Fund Holdings as a Driver of Flows

We show that media coverage of mutual fund holdings affects how investors allocate money across funds. Controlling for fund performance, fund holdings with high past returns attract extra flows only if these stocks were recently featured in major newspapers. In contrast, holdings that were not covered in the media do not affect flows. We present evidence that media coverage tends to amplify investors' chasing of past returns rather than facilitate the processing of useful information in fund portfolios. Fund managers exploit this behavior by purchasing media-covered past winners at reporting dates, a strategy most prevalent among poorly performing funds. Our evidence suggests that media coverage can exacerbate investor biases and that it is the primary mechanism that makes window-dressing effective.