Norwegian mutual fund newsletters : newsletter information and its relation to performance, fund manager efforts, and investor flows

Abstract

By analysing the sentiment and similarity of monthly Norwegian mutual fund newsletters, we find that more positive sentiment and higher similarity is associated with higher performance in the relevant month. We find no proof of an overall connection between newsletter characteristics and fund manager efforts, measured by active share. Further, by constructing portfolios based on the most recent newsletters available to investors, we find that a high-sentiment portfolio does not outperform a low-sentiment portfolio. This suggests that the rationale behind distributing newsletters is in part marketing. Investors do however not respond to sentiment-related information, indicating a lack of successfulness for newsletters as a marketing tool. Lastly, a “non-changer” portfolio outperforms a “changer” portfolio for two out of three similarity measures, and cannot solely be explained by common risk factors. As investors do not respond to newsletter changes, this signals the existence of a potential market inefficiency.