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Marketing Intensity vs. Financial Fundamentals: Analyzing Investor Behavior in Hong Kong's Mandatory Provident Fund Market
Abstract
This study investigates the relationship between marketing intensity, measured through the management expense ratio (MER), and investor behaviour in Hong Kong's mandatory provider fund (MPF) system, particularly under unstable market returns. This study aims to identify whether marketing efforts influence fund performance and investor choices in a regulated and transparent pension framework. A quantitative research design was employed, utilising secondary data from 413 MPF funds across 12 trustees for the period 2019–2023. An Ordinary Least Squares (OLS) regression model was used to analyse the impact of the MER on investor behaviour while controlling for fund size, age, risk, and return volatility. The results reveal that marketing intensity has no significant impact on fund performance or investor decisions within the MPF system. Instead, fundamental financial characteristics such as fund size and volatility play a more decisive role. Larger funds demonstrate better performance due to diversification benefits, whereas higher volatility correlates with greater returns, albeit with increased risk. The findings suggest that fund managers should prioritise enhancing intrinsic financial characteristics, such as risk management and diversification, over marketing expenditure. Policymakers should be encouraged to reinforce financial literacy programs to ensure informed investment decisions. Investors should focus on core financial metrics rather than being swayed by marketing efforts. This study contributes to the limited literature on the role of marketing intensity in regulated pension systems, challenging the conventional emphasis on promotional efforts to influence investor behaviour. This underscores the primacy of financial fundamentals over marketing in investment decision-making within transparent and efficient markets.
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