Marketing Mutual Funds

Nikolai Roussanov, Hongxun Ruan and Yanhao Wei

No 25056, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Marketing and distribution expenses are responsible for about a third of the cost of active management in the mutual fund industry. We develop and estimate a structural model of mutual fund marketing with learning about unobserved skill and costly investor search. Our estimates suggest that marketing is nearly as important as performance and fees for determining fund size. Eliminating marketing substantially improves welfare, as capital shifts towards cheaper funds and competition decreases fees. Average alpha increases as active funds shrink, and capital allocation becomes more closely aligned with manager skill net of fees. Declining investor search costs over time imply a reduction in marketing expenses and management fees as well as a shift towards passive investing, as observed empirically.

JEL-codes: D14 D83 G11 G23 G28 M3 (search for similar items in EconPapers)
Date: 2018-09
New Economics Papers: this item is included in nep-com and nep-fmk
Note: AG AP CF IO
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published as Nikolai Roussanov & Hongxun Ruan & Yanhao Wei & Stijn Van Nieuwerburgh, 2021. "Marketing Mutual Funds," The Review of Financial Studies, vol 34(6), pages 3045-3094.

Downloads: (external link)
http://www.nber.org/papers/w25056.pdf (application/pdf)

Related works:
Journal Article: Marketing Mutual Funds (2021)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:25056

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w25056

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by (wpc@nber.org).