Tweeting for Money: Social Media and Mutual Fund Flows

We unveil asset managers' social media communications as a distinct new channel for attractingflows of money to mutual funds. Combining a database of almost 1.6 million Twitter posts byU.S. mutual fund families with textual analysis, we find that flows of money to mutual fundsrespond positively to tweets with a positive tone. The link between social media communicationsand flows of money is amplified by users' reactions to the family's tweets and is independent ofmarketing strategies. Moreover, social media communications by mutual fund families are notjust a vehicle for customer service and do not simply mirror news. A high-frequency analysisthat exploits intraday ETF trade data allows us to isolate the effect of tweets on investordecisions from potential confounders. Further tests support the hypothesis that asset managers'social media communications reduce search costs for potential investors. We also find evidenceconsistent with asset management firms using social media as a tool for persuasion. In contrast,asset management companies do not use social media to alleviate information asymmetries bycommunicating performance-relevant information to investors.