Evolution of Mutual Fund (MF) industry is considered amongst the most successful
financial innovations in the world (Khorana et al., 2005). The MFs are increasingly gaining
importance world over as an investment avenue. Hence the MF industry is experiencing
spectacular growth and has approximately tripled its size of net assets from $9.6 tn in 1998
to $26 tn in 20071, corresponding to a CAGR2 of 12.38%. This growth in the net assets
was accompanied by exponential growth in the number of MF Companies (MFCs) and
schemes being offered by them. This has increased the competition amongst MFCs as they
have to vie with each other to attract the existing and prospective investors towards their
MFs. As a result, the MFCs are aggressively engaged in development, launch, promotion,
distribution and maintenance of their new and existing MFs. The successful marketing of
MFs requires a clear understanding of how the level of investors’ Purchase Decision
Involvement (PDI) impacts their investment behavior. Yet the MF marketers have only
a naïve understanding of the above relationship. While there is a dearth of studies which
have directly focused on understanding the impact of the level of investors’ PDI on their investment behavior, several studies in the marketing and consumer behavior literature
suggest that the level of consumers’ involvement should influence a person’s search
behavior and information processing behavior (Kassarjian, 1981; Celsi and Olson, 1988;
Maheswaran et al., 1992; Swinyard, 1993; and Lamb et al., 2004).
This study draws upon the existing relevant literature to propose a series of hypotheses
related to the influence of level of PDI on the investment behavior of MF investors. These
hypotheses put forward the possible impact of PDI on the information search behavior and
information processing behavior of MF investors. The specific research issues examined
through these hypotheses are: How the level of PDI impacts the width of information
search by MF investors? How the level of PDI impacts the depth of information search
by MF investors? How the level of PDI impacts the width of information processing by
MF investors? How the level of PDI impacts the depth of information processing by MF
investors?
The proposed hypotheses are empirically validated on the data collected through a
survey of 268 respondents. Based on the findings of the study we argue that: (a) level
of PDI significantly impacts the prepurchase information search and information
processing behavior of MF investors; (b) during information search low PDI MF
investors are likely to use fewer number of information source to collect information,
rely less on source providing detailed information related to MFs (e.g., financial portal,
etc.) and rely more on banks as a source of investment advice in comparison to high
PDI MF investors; and (c) during information processing low PDI MF investors are likely
to use information on fewer number of attributes to compare MFs, do not process MFs
related attribute information in details in comparison to high PDI MF investors.
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