Advertising in the mutual fund business: The role of judgmental heuristics in private investors' evaluation of risk and return

Abstract

Effective advertising strategies are of growing importance in the mutual fund industry due to keen competition and changes in market structure. But the dominant variables in financial decision making, investor's perceived investment risk and expected return, have not yet been analysed in an advertising context, although these productrelated evaluations can be influenced by advertising and therefore serve as additional indicators of advertising effectiveness. In this study, the authors use a large-scale experimental study (n=499) to detect how risk-return assessments of private investors are influenced by specific elements of print ads. In this context, judgmental heuristics used systematically by private investors play a crucial role.