Advertising and Mutual Funds: From Families to Individual Funds

We find that advertising appears to have significant effects on investor flows at the industry, family and individual fund level. At the industry level, flows are higher in months with more advertising dollars spent, even for non-advertising families. At the family level, flows have a convex relation with advertising expenditures, similar to that for performance, with a significant positive effect for high relative advertisers only. At the individual fund level, advertising stems redemptions rather than increasing purchases of fund shares. We further find that advertising can affect the fund?s flow-performance sensitivity, dampening it for poorly performing funds and increasing it for highly performing funds.