UC Irvine

This paper studies mutual funds' use of social media (Twitter) as a new marketing instrument and its effects on the behavior of mutual fund investors. Using hand-collected data from Twitter regarding 175 mutual fund families, I find that mutual fund families are more likely to introduce Twitter when they have star funds in the family and when they are introducing new funds. The average inception size of new funds after a family joined Twitter is significantly larger than before joining Twitter. Moreover, mutual fund families using Twitter receive higher subsequent flows relative to other similar non-Twitter families. These incremental flows disappear six months after the introduction of Twitter. The higher flows are not entirely driven by the flows to the newly launched funds, as pre-existing funds also experience higher flows after introducing Twitter. The flow effect is especially pronounced for young funds within a family. Overall, the evidence suggests that mutual funds strategically use the introduction of Twitter to capture investors' attention and attract flows.