The Economics of Mutual Fund Marketing

70 Pages Posted: 22 Nov 2022 Last revised: 13 Jun 2023

See all articles by Jane Chen

Jane Chen

The Chinese University of Hong Kong, Shenzhen (CUHK-Shenzhen)

Wenxi Jiang

CUHK Business School, The Chinese University of Hong Kong

Mindy Z. Xiaolan

University of Texas, Austin - Department of Finance

Date Written: November 14, 2022

Abstract

We uncover a significant relationship between the persistence of marketing and investment skills among U.S. mutual fund companies. Using regulatory filings, we calculate the share of marketing-oriented employees to total employment and reveal a large heterogeneity in its level and persistence. A framework based on costly signaling and learning helps explain the observed marketing decision. The model features a separating equilibrium in which fund companies' optimal marketing employment share responds to their past performance differently, conditional on the skill level. We confirm the model prediction that the volatility of the marketing employment share negatively predicts the fund companies' long-term performance.

Keywords: Marketing Employment Share, Persistence in Marketing, Learning, Costly Signaling, Fund Skill

Suggested Citation

Chen, Jane and Jiang, Wenxi and Xiaolan, Mindy Z., The Economics of Mutual Fund Marketing (November 14, 2022). Available at SSRN: https://ssrn.com/abstract=4277000 or http://dx.doi.org/10.2139/ssrn.4277000

Jane Chen

The Chinese University of Hong Kong, Shenzhen (CUHK-Shenzhen) ( email )

School of Management and Economics, CUHK-Shenzhen
2001 Longxiang Boulevard, Longgang District
Shenzhen, Guangdong 518172
China

HOME PAGE: http://https://www.janejingxuanchen.com/

Wenxi Jiang

CUHK Business School, The Chinese University of Hong Kong ( email )

Room 1210, Cheng Yu Tung Building
Chinese University of Hong Kong
Shatin, NT 06520
Hong Kong

HOME PAGE: http://https://sites.google.com/site/jiangwenxi/

Mindy Z. Xiaolan (Contact Author)

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

Red McCombs School of Business
Austin, TX 78712
United States

HOME PAGE: http://sites.google.com/view/mindyxiaolan

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