Seminar

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.