Abstract: This paper studies the role of advertising in the mutual fund industry. I use comprehensive advertising data along with hand-collected data on the menu of investment options offered to 401(k) plan participants to disentangle the informative and persuasive roles of advertising. I first establish that advertising significantly increases investor flows at the family and individual fund levels. To alleviate endogeneity concerns, I use ads placed by the parent company of each mutual fund family and ads by political campaigns as exogenous shocks to advertising. I further provide evidence for persuasive advertising in this market: First, fund family advertising is not affected by the family's lagged performance. Thus, it is not the case that when fund families perform well, they advertise more. Second, higher quantities of advertising are not associated with higher post-advertising performance, which indicates that higher quantities of advertising do not signal higher unobservable fund manager ability. Finally, advertising affects flows even if investors have a limited set of investment options where historical returns and fees are disclosed in a standardized format. I develop and estimate a structural demand model and show that demand is 55% less sensitive to expense ratio and 48% less sensitive to past returns when a fund family advertises, suggesting that persuasion is an important reason why mutual fund families advertise. Misguided financial decisions caused by persuasive advertising are particularly important in this market as they can have long-term consequences such as lower wealth during retirement.

Abstract: We assess the impact of the 2012 JOBS Act equity crowdfunding legislation that allows U.S. non-accredited investors to invest in private small businesses through online portals. The goals of the new regulation were to spur small business growth and democratize investment in private startups by increasing access to capital. We find that the evidence is mixed: on the one hand, crowdfunding seems to expand access to finance to small businesses by targeting firms that are not usually served by institutional investors like an angel and venture capital. Furthermore, having a successful crowdfunding campaign has a causal positive effect on future firm performance relative to a failed campaign. On the other hand, the equity crowdfunding market faces severe adverse selection that limits the expansion of this new form of business financing. Moreover, relative to angel-backed firms, successfully crowdfunded firms are less likely to progress through the financing funnel and thus provide an exit to investors.

Abstract: This paper documents the transmission of private information in Manhattan from investment banks to mutual funds in the form of information regarding future M&A deals. We use detailed data on all taxi rides in New York City to create a measure of meetings between investment banks and mutual funds. We find that when an investment bank is an advisor for an M&A deal, mutual funds are more likely to purchase the stock of the target before announcement when they meet more frequently with the advising bank over the quarter. Our results suggest that investment banks may be sharing private information with mutual funds, enabling them to engage in insider trading. These results provide a potential rationale for why many mutual funds cluster in specific parts of Manhattan close to investment banks.