Effect of Monetary Policies on the Relationship between Advertising and Mutual Fund Flows

45 Pages Posted: 15 May 2017

See all articles by Ming-Hung Wu

Ming-Hung Wu

Beijing Normal University - Zhuhai Campus

Wei-Che Tsai

Oregon State University; National Sun Yat-sen University - Department of Finance

Miao-Ling Chen

National Sun Yat-sen University - Department of Finance

Date Written: August 5, 2016

Abstract

This paper investigates the effect of monetary policies, mainly proxied by interest rate changes, on the relationship between advertising and subsequent net cash flows for Taiwan’s mutual fund industry. Based on a comprehensive mutual fund dataset and allowing for a precise estimation of fund inflows and outflows, we find that there is positive advertising-cash flow relation under different macroeconomic conditions. Taking into account a change in the interest rate, we document that the positive relationship between the two only exists when the interest rate is at a relatively low level regardless of restrictive and expansionary periods. Our empirical findings shed new light on marketing strategies whereby mutual fund advertising works well during relatively low interest rate environments, which are generally interpreted as exhibiting low cost of capital and a good signal of future economic conditions.

Keywords: Advertising; Mutual Funds; Monetary Policy; Panel Threshold Model

JEL Classification: C32, E43, G11

Suggested Citation

Wu, Ming-Hung and Tsai, Wei-Che and Chen, Miao-Ling, Effect of Monetary Policies on the Relationship between Advertising and Mutual Fund Flows (August 5, 2016). Available at SSRN: https://ssrn.com/abstract=2968324 or http://dx.doi.org/10.2139/ssrn.2968324

Ming-Hung Wu

Beijing Normal University - Zhuhai Campus ( email )

No 18 Jinfeng Road, Tangjiawan
Zhuhai, Guangdong
China

Wei-Che Tsai

Oregon State University ( email )

Corvallis, OR 97331
United States

National Sun Yat-sen University - Department of Finance ( email )

No.70, Lianhai Rd., Gushan District,
Kaohsiung City
Taiwan

Miao-Ling Chen (Contact Author)

National Sun Yat-sen University - Department of Finance ( email )

No.70, Lianhai Rd., Gushan District,
Kaohsiung City
Taiwan

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