Prior studies have found that a firm advertising for one of its products not only can increase the sales of the advertised product, but also spill over the advertising effect by increasing sales of other existing products in the same brand. This study examines whether a fund family spending money on one of its managed funds can attract more money flows into the advertised fund and bring the advertising spillover effect that attract more money flows into other members in the same family. Under the assumption that a fund family is a risk aversion investor endowed with a negative exponential utility function, this study finds a theoretical allocation proportion for a fund family¡¦s spending on advertising of individual funds under management, which is the function of the fund family¡¦s risk aversion level and initial wealth, as well as the mean and the variance of the expected returns generated by individual funds¡¦ advertising and the advertising spillover effect. Empirically, the evidence shows that an advertised fund can significantly attract greater cash flows and bring the significant advertising spillover effect on cash flows of other individual funds in the same family. After grouping funds into lower-, mid- and higher-performing funds based on funds¡¦ past performance, the results indicate that an advertised fund with mid performance can attract greater cash flows than an advertised fund with higher and lower performance. Moreover, an advertised fund can bring stronger advertising spillover effect on cash flows of higher-performing funds than lower- and mid-performing funds in the same family. Regarding with the family cash flows, the evidence shows that a fund family¡¦s aggregating advertising expenditures on managed funds can significantly increase the family cash flows and the advertising effect on the family cash flows is stronger in large families than in small families. The empirical results suggest that a fund family can benefit from its advertising expenditures and which allocating higher proportion for advertising of mid-performing funds than higher-performing funds could attract money flows into its managed funds more efficiently.

This dissertation studies underfunding in defined benefit (DB) pension plans and firms' contribution behavior, 401(k) plan participant investments in lifecycle funds under plan sponsors' initiative, and fund commonalities within mutual fund families. Responding to the recent decline in DB pension funding, firms have increased pension contributions to their underfunded plans. In the first essay I empirically examine firms' contribution behavior to underfunded DB plans and funding choice for pension contributions. I find that firms reveal different sensitivities of pension contributions to underfunding across aggregate funding levels. Furthermore, at a lower funding level firms have the greater sensitivity of pension contributions to underfunding and significantly utilize the tax deductibility of pension contributions. As for a funding choice to fund pension deficits, firms use debt financing at a low funding level, but utilize internal funding by decreasing capital expenditures at a lower funding level. Firms that use the debt financing are likely to have investment-grade credit ratings or high debt leverage, while firms that use the internal funding are likely to be high-levered ones. Recently lifecycle funds have rapidly grown in self-directed retirement plans. Despite the increasing popularity among plan sponsors and participants, there are few empirical studies on lifecycle funds. In the second essay, I examine the recent lifecycle fund adoption behavior of 401(k) plan participants from 2004 to 2006. I find that the likelihood of participants changing an investment strategy to adopt lifecycle funds is not significantly affected by participant demographic characteristics, but by participant account and plan design features. This study extends our understanding of 401(k) plan participants' investment behavior by finding (1) that the substitution of lifecycle funds for balanced funds, as well as the designation of lifecycle funds as a plan default, strongly affect participants' investments in lifecycle funds and (2) that balanced fund holdings of participants are negatively associated with their lifecycle fund investments. Mutual funds account for a significant portion of household financial assets and retirement assets. An understanding of characteristics of mutual funds is crucial to fund investors--especially those whose retirement nest eggs are in mutual funds. In the final essay, I examine the impacts of fund commonalities within mutual fund families on fund characteristics in terms of return residual correlations and fund operating expenses. As fund commonalities within a fund family, I focus on common stock holdings and common management of funds. I find that common stock holdings and an existence of a common manager of funds are positively related to return residual correlations, but negatively related to fund operating expenses. This finding suggests that when investors select low-cost equity funds within a family, they should be aware that there exists an investment risk that the fund commonalities that lower fund operating expenses may additionally increase return correlations of the funds. / Business Administration