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http://ssrn.com/abstract=958784
 
 

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Spillover Effects of Marketing in Mutual Fund Families


Marno Verbeek


Erasmus University - Rotterdam School of Management; Erasmus Research Institute of Management (ERIM); Netspar

Joop Huij


Erasmus University - Rotterdam School of Management; Robeco Quantitative Strategies; Erasmus University Rotterdam (EUR) - Erasmus Research Institute of Management (ERIM)

February 26, 2007

ERIM Report Series
EFA 2007 Ljubljana Meetings Paper

Abstract:     
This paper investigates the presence of spillover effects of marketing in mutual fund families. We find that funds with high marketing expenses generate spillovers, and enhance cash inflows to family members with low marketing expenses. In particular, low-marketing funds that are operated by a family with high marketing expenses have substantially larger inflows after positive returns than otherwise similar funds that are operated by a family with low marketing expenses, while they have smaller outflows after negative returns. One way to interpret the spillovers is that they are a by-product of individual fund marketing whereby the entire family is made more visible to investors. An alternative explanation of this observation is that funds with low marketing expenses are directly subsidized by family members with high marketing expenses. We develop and perform a set of tests to evaluate these two alternative hypotheses. The results of all tests support the subsidization hypothesis, and suggest that at least part of the spillovers can be attributed to favoritism. These results suggest that conflicts of interest between investors and fund families have been exacerbated by competition in the mutual fund industry.

Number of Pages in PDF File: 44

Keywords: Mutual fund flows, marketing, cross-subsidization, favoritism

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Date posted: January 25, 2007 ; Last revised: June 8, 2010

Suggested Citation

Verbeek, Marno and Huij, Joop, Spillover Effects of Marketing in Mutual Fund Families (February 26, 2007). ERIM Report Series; EFA 2007 Ljubljana Meetings Paper. Available at SSRN: http://ssrn.com/abstract=958784 or http://dx.doi.org/10.2139/ssrn.958784

Contact Information

Marno Verbeek
Erasmus University - Rotterdam School of Management ( email )
P.O. Box 1738
Room T09-53
3000 DR Rotterdam
Netherlands
+31 10 408 2790 (Phone)
HOME PAGE: http://www.rsm.nl/mverbeek
Erasmus Research Institute of Management (ERIM)
P.O. Box 1738
3000 DR Rotterdam
Netherlands
Netspar
P.O. Box 90153
Tilburg, 5000 LE
Netherlands
Joop Huij (Contact Author)
Erasmus University - Rotterdam School of Management ( email )
P.O. Box 1738
Rotterdam, 3000 DR
Netherlands
HOME PAGE: http://www.rsm.nl/jhuij
Robeco Quantitative Strategies
Rotterdam, 3011 AG
Netherlands
HOME PAGE: http://www.robeco.com/quant
Erasmus University Rotterdam (EUR) - Erasmus Research Institute of Management (ERIM)
P.O. Box 1738
Rotterdam, 3000 DR
Netherlands
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