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Gravitation toward prior fund performance in mutual fund advertising. Does consumer investors' processing abilities account for biased information processing?


Hüsser, Andreas; Wirth, Werner (2013). Gravitation toward prior fund performance in mutual fund advertising. Does consumer investors' processing abilities account for biased information processing? Journal of Consumer Affairs, 47(2):219-242.

Abstract

This study examines the cognitive processes involved in consumer investors' information processing of mutual fund characteristics. We tested whether consumer investors' limited processing abilities account for biased return perceptions, as reported in the literature. Consumer investors' processing abilities were manipulated by varying the duration of information exposure time to a mutual fund advertisement. Experimental results suggest that a longer time spent by consumer investors learning about mutual fund characteristics resulted in reduced reliance on prior fund performance as a heuristic cue, which in turn resulted in an unbiased processing of mutual fund characteristics. In contrast, when consumer investors spent less time learning about mutual fund characteristics, prior fund performance significantly affected subsequent return expectations and argument persuasiveness of the mutual fund advertisement. These findings suggest that disclaimers warning that past performance does not guarantee future results are ineffective when consumer investors have limited attention and lower processing abilities.

This study examines the cognitive processes involved in consumer investors' information processing of mutual fund characteristics. We tested whether consumer investors' limited processing abilities account for biased return perceptions, as reported in the literature. Consumer investors' processing abilities were manipulated by varying the duration of information exposure time to a mutual fund advertisement. Experimental results suggest that a longer time spent by consumer investors learning about mutual fund characteristics resulted in reduced reliance on prior fund performance as a heuristic cue, which in turn resulted in an unbiased processing of mutual fund characteristics. In contrast, when consumer investors spent less time learning about mutual fund characteristics, prior fund performance significantly affected subsequent return expectations and argument persuasiveness of the mutual fund advertisement. These findings suggest that disclaimers warning that past performance does not guarantee future results are ineffective when consumer investors have limited attention and lower processing abilities.

Citations

1 citation in Web of Science®
3 citations in Scopus®
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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:06 Faculty of Arts > Institute of Mass Communication and Media Research
Dewey Decimal Classification:700 Arts
Language:English
Date:April 2013
Deposited On:30 Oct 2013 12:32
Last Modified:05 Apr 2016 17:05
Publisher:Wiley-Blackwell
ISSN:0022-0078
Publisher DOI:https://doi.org/10.1111/joca.12007

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