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Adjusting to the Information Environment: News Tangibility and Mutual Fund Performance

Author

Listed:
  • Oleg Chuprinin

    (School of Banking and Finance, University of New South Wales, 2052 UNSW Sydney, Australia)

  • Sérgio Gaspar

    (Finance Department, INSEAD,77305 Fontainebleau, France)

  • Massimo Massa

    (Finance Department, INSEAD,77305 Fontainebleau, France)

Abstract

We study the relation between mutual funds’ performance and shocks to the public information environment of their investments. For each stock, we distinguish between quantitative, or tangible, news (expressed with numeric characters) and qualitative news (expressed as verbal content). We find that funds that trade more actively in response to changes in the stocks’ information tangibility earn higher risk-adjusted returns. Funds that are particularly sensitive to such fluctuations have smaller managerial teams and employ managers who are more focused. Overall, our evidence suggests that signals associated with changes in the type of public information constitute a channel of value creation in asset management.

Suggested Citation

  • Oleg Chuprinin & Sérgio Gaspar & Massimo Massa, 2019. "Adjusting to the Information Environment: News Tangibility and Mutual Fund Performance," Management Science, INFORMS, vol. 65(3), pages 1430-1453, March.
    • Handle: RePEc:inm:ormnsc:v:65:y:2019:i:3:p:1430-1453
    DOI: 10.1287/mnsc.2017.2835
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    References listed on IDEAS

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    2. Yanan Li & Wenjun Wang, 2022. "Company visits and mutual fund performance: new evidence on managerial skills," Journal of Asset Management, Palgrave Macmillan, vol. 23(6), pages 504-521, October.
    3. Juan Carlos Matallín-Sáez & Amparo Soler-Domínguez & Diego Víctor Mingo-López, 2021. "On management risk and price in the mutual fund industry: style and performance distribution analysis," Risk Management, Palgrave Macmillan, vol. 23(1), pages 150-171, June.

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    information; media; mutual funds;
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