Spillovers and Common Investor Attention in Institutional Fund Networks
Abstract
This paper constructs dynamic networks of institutional funds based on investors' revealed preferences, captured through co-viewership on a leading asset management platform. Shocks to peer funds-identified solely through shared investor attention-predict subsequent returns and flows of focal funds, above and beyond the effects of overlapping stock holdings, style similarity, and textual similarity in fund prospectuses. Consistent with limited investor attention, these spillover effects are sluggish and amplified for connections that investors tend to overlook. Fund managers actively respond to negative spillovers by rebalancing portfolios away from attention-linked peers. In contrast, idiosyncratic peer shocks-such as key manager departures-generate positive inflows to attention-linked funds. The findings reveal an investor attention-based channel of shock propagation across institutional funds, with important implications for diversification across multiple fund managers and the stability of the sector.