The Impact of Advertising on Fund Flows in Alternative Distribution Channels

Existing literature demonstrates a positive relationship between advertising and subsequent mutual fund flows. While this relationship is hardly unexpected, it has only been addressed in a limited fashion. This work seeks to explore the issue in greater depth by examining both fixed income and equity funds, by separating load and no-load funds, and by using a richer empirical model. Our findings support the accepted relationship in general, but indicate that the response by investors differs between fund types (equity vs. fixed income) and the direct (no-load) and broker-sold (load) markets. Finally, we provide evidence that earlier findings are contingent upon the sample of funds selected as well as the empirical specification.