Does Media Attention Affect The Fund Flow?

After the Internet bubble burst, the search engine greatly promotes people's initiative and freedom in obtaining information. But a new problem arises too:people fall into a sea of information as soon as they get rid of the information desert because for the information demanders, the information is infinite or even excessive while their attention is limited. Kahneman (1973) defined attention as a scarce cognitive resource. For fund investors, the acquirement of information directly affects their fund income expectation and risk assessment. In the context of relative information excess, the thesis attempts to analyze the influence of the media attention on fund cash flow on the base of the limited attention theory.The thesis first discusses the mechanism of limited attention, media attention and fund cash flow. It builds media attention criteria by the amount of Internet news related to funds. It then explores the determinants of media attention from an empirical point of view by analyzing the quarterly data of open equity-oriented funds from Q2 in 2004 to Q4 in 2009, and examines the influence of the media attention on fund cash flow, it reflects on whether the "attention-driven fund purchase effect" can actually bring good returns to investors.The empirical results show that such fund characteristics as fund scale, fund return fluctuation rate and fund age are important factors that determine the media attention. By controlling such fund characteristics variables as whether it is a new fund or star fund, it shows that media attention has significant positive effect on fund inflows, indicating that investors'fund purchases are influenced by news report. In the robustness test, it shows that media attention has significant positive effect on fund flow after using two-stage least square method to solve the endogeneity. Finally, the thesis concludes that "attention-driven fund purchase effect" does not bring good returns to investors, and that the fund whose cash inflow has greater media attention in the previous period is not significantly better than that whose cash inflow has smaller media attention in this period.