This study investigates the impact of level of Purchase Decision Involvement (PDI) of Mutual Fund (MF) investors on their investment behavior through a survey of 268 MF investors. Overall the results suggest that the level of PDI significantly impacts the investment behavior of MF investors. Further, the results suggest significant difference in the width and depth of information search and information processing by low PDI MF investors and high PDI MF investors. Specifically, it is found that (a) during information search low PDI MF investors are likely to use fewer number of information sources to collect information, rely less on sources providing detailed information related to MFs (e.g., financial portal) and rely more on banks as a source of investment advice in comparison to high PDI MF investors; and (b) during information processing low PDI MF investors are likely to use information on a fewer number of attributes to compare MFs, and do not process MF-related attribute information in details in comparison to high PDI MF investors. The implications of the findings that are relevant to the marketing of MFs are also discussed.

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.

Behavioral Finance Journal, Asset Pricing, Contingent States, Capital Asset Pricing Model, Prospect Theory, Financial Literature, Bullish Market, Asymmetric Evaluation, Capital Asset Pricing Model, French Market, Political Crises, Asian Financial Crisis.