Lee, Wan-shiuan

Previous researches find that advertising expenditure and performance can significantly influence fund flows. With a unique data from Securities Investment Trust and Consulting Association (SITCA) of Taiwan, we can use monthly data of exact purchasing amounts, redemption amounts and advertising expenditures to gain more insight into investors\ue2 investment behavior. We examine the impact of advertising on mutual fund investors\ue2 behavior and the performance-flow relationship. This paper differs from the existing literature, which only concerned with the average advertising effect on fund flow. We follow the procedure of Tsay (1989) time series autoregressive processes model and modify it to cross-section variables threshold model to examine whether threshold effect of advertising on fund flows exists. We generate four empirical results. (1) Performance is significantly associated with higher fund flows. (2) Advertising is significantly associated with higher fund flows. (3) Disposition effect exists in Taiwanese mutual fund market and advertising expenditure can partially enhance the disposition effect. (4) We also measure the threshold effect of advertising on fund flows

The Impact of Advertising on Investors\ue2 Behavior: Disposition Effect and Threshold Effect

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