Tweeting for Money: Social Media and Mutual Fund Flows

We unveil asset managers’ social media communications as a distinct new channel for attracting flows of money to mutual funds. Combining a database of more than 1.6 million posts on X/Twitter by U.S. mutual fund families with textual analysis, we find that flows of money to mutual funds respond positively to both the number and tone of the posts. Whereas the link between social media communications and flows of money is not explained by conventional marketing efforts, our findings suggest that the social media channel is not independent from asset management companies’ broader marketing strategies. A high-frequency analysis that exploits intraday ETF trade data allows us to isolate the effect of tweets on investor decisions from potential confounders. We then consider and test four different economic mechanisms. The results of these tests do not support the hypothesis that asset managers’ social media communications reduce search costs for potential investors. The results do not support, either, that asset management companies’ Twitter activity increases investor attention or alleviates information asymmetries by communicating performance-relevant information to investors. In contrast, our evidence suggests that asset managers use social media as an effective persuasion tool. This paper was accepted by Camelia Kuhnen, finance. Funding: Both authors acknowledge financial support from the FinTech & Digital Finance Chair at Paris Dauphine - PSL. J. Gil-Bazo acknowledges financial support from the Severo Ochoa Programme for Centres of Excellence in R&D (Barcelona School of Economics) [Grant CEX2024-001476-S], funded by MCIN/AEI/10.13039/501100011033, as well as from the Spanish Ministry of Science and Innovation [Grant PID2023-153288NB-I00]. Supplemental Material: The internet appendix and data files are available at https://doi.org/10.1287/mnsc.2024.07584 .