The Importance of Family: The Role of Mutual Fund Family Reputation in Investment Decisions

54 Pages Posted: 15 Mar 2012 Last revised: 5 Oct 2018

See all articles by William Christopher Gerken

William Christopher Gerken

University of Kentucky - Finance

Laura T. Starks

University of Texas at Austin - Department of Finance

Michael Yates

University of Texas at Austin - McCombs School of Busiiness

Date Written: September 27, 2018

Abstract

We examine the effect of investors’ prior experience with mutual fund families on their subsequent investment decisions. Using a sample from a large discount broker, we find that investors are significantly more likely to purchase funds from families with which they have previous experience. Our results are consistent with the influence of family-level reputation and robust to alternative explanations such as service quality, fee discounts, marketing, blind loyalty, or inertia. Further consistent with reputation theories, individuals' beliefs about more reputable families appear to change slowly. After experience-based purchases, investors earn higher returns even controlling for investor ability and within-family correlation.

Keywords: individual investor portfolio choice, mutual fund families, reputation

JEL Classification: L01, D83, G11, D14

Suggested Citation

Gerken, William Christopher and Starks, Laura T. and Yates, Michael, The Importance of Family: The Role of Mutual Fund Family Reputation in Investment Decisions (September 27, 2018). Available at SSRN: https://ssrn.com/abstract=2022503 or http://dx.doi.org/10.2139/ssrn.2022503

William Christopher Gerken (Contact Author)

University of Kentucky - Finance ( email )

College of Business & Economics
Lexington, KY 40506-0034
United States

HOME PAGE: http://www.willgerken.com

Laura T. Starks

University of Texas at Austin - Department of Finance ( email )

Red McCombs School of Business
Austin, TX 78712
United States
512-471-5899 (Phone)
512-471-5073 (Fax)

Michael Yates

University of Texas at Austin - McCombs School of Busiiness ( email )

Austin, TX 78712
United States

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