Seminar
Participer
Département: Finance
Intervenant: Mindy Xiaolan (UT Austin)
Salle: TBD
The Economics of Mutual Fund Marketing
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.