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How Does Simplified Disclosure Affect Individuals' Mutual Fund Choices?

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Author Info
John Beshears
James J. Choi
David Laibson
Brigitte C. Madrian

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Abstract

We use an experiment to estimate the effect of the SEC's Summary Prospectus, which simplifies mutual fund disclosure. Our subjects chose an equity portfolio and a bond portfolio. Subjects received either statutory prospectuses or Summary Prospectuses. We find no evidence that the Summary Prospectus affects portfolio choices. Our experiment sheds new light on the scope of investor confusion about sales loads. Even with a one-month investment horizon, subjects do not avoid loads. Subjects are either confused about loads, overlook them, or believe their chosen portfolio has an annualized log return that is 24 percentage points higher than the load-minimizing portfolio.

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Publisher Info
Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14859.

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Date of creation: Apr 2009
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Handle: RePEc:nbr:nberwo:14859

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Find related papers by JEL classification:
C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
D14 - Microeconomics - - Household Behavior - - - Personal Finance
D18 - Microeconomics - - Household Behavior - - - Consumer Protection
G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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This page was last updated on 2009-11-7.

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