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Do key investor information documents enhance retail investors’ understanding of financial products? Empirical evidence

Author

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  • Andreas Oehler
  • Andreas Höfer
  • Stefan Wendt

Abstract

Purpose - – The purpose of this paper is to analyze whether key investor information documents (KIDs) provided by suppliers/issuers help retail investors to understand the key characteristics of financial products. KIDs are fact sheets composed to describe the characteristics of financial products in a brief, standardized and straightforward manner. Design/methodology/approach - – In the empirical analysis, the authors evaluate different versions of KIDs and examine whether they meet minimum requirements to provide benefits for consumers. Findings - – The empirical results suggest that subjects assess KIDs of suppliers/issuers merely as moderately appropriate to grasp the key characteristics of financial products. In contrast, neutral benchmark KIDs are generally evaluated as being superior to those of suppliers/issuers, which at best meet current legal requirements. Originality/value - – The authors argue that a major reason for these findings is consumer policy’s assumption of omnicompetent subjects in line with the neoclassical idea of aHomo economicus. This assumption, however, is far from being both realistic and practical.

Suggested Citation

  • Andreas Oehler & Andreas Höfer & Stefan Wendt, 2014. "Do key investor information documents enhance retail investors’ understanding of financial products? Empirical evidence," Journal of Financial Regulation and Compliance, Emerald Group Publishing Limited, vol. 22(2), pages 115-127, May.
    • Handle: RePEc:eme:jfrcpp:v:22:y:2014:i:2:p:115-127
    DOI: 10.1108/JFRC-10-2013-0035
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    Citations

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    Cited by:

    1. Oehler, Andreas & Horn, Matthias & Wendt, Stefan, 2020. "Information Illusion: Placebic Information and Stock Price Estimates," VfS Annual Conference 2020 (Virtual Conference): Gender Economics 224575, Verein für Socialpolitik / German Economic Association.
    2. Andreas Oehler & Stefan Wendt, 2017. "Good Consumer Information: the Information Paradigm at its (Dead) End?," Journal of Consumer Policy, Springer, vol. 40(2), pages 179-191, June.
    3. D. Scheld & O. Stolper & A. Walter, 2021. "Double Dutch Finally Fixed? A Large-Scale Investigation into the Readability of Mandatory Financial Product Information," Journal of Consumer Policy, Springer, vol. 44(2), pages 151-178, June.
    4. P. Münchhalfen & R. Gaschler, 2021. "Attention Distribution of Current Key Investor Documents: Standardization as a Long-Term Goal of the PRIIP Regulation," Journal of Consumer Policy, Springer, vol. 44(1), pages 73-94, March.
    5. M. G. Ceravolo & V. Farina & L. Fattobene & L. Leonelli & G. Raggetti, 2021. "Gender-Related Variability in Information Processing of Disclosure Documents," Journal of Consumer Policy, Springer, vol. 44(2), pages 217-233, June.

    More about this item

    Keywords

    Behavioral economics; Information asymmetry; Financial literacy; Key investor information documents; Neuroeconomics; D14; G18; P46;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • P46 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Consumer Economics; Health; Education and Training; Welfare, Income, Wealth, and Poverty

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