How Does Simplified Disclosure Affect Individuals' Mutual Fund Choices?

John Beshears, James Jinwoo Choi, David Laibson () and Brigitte C. Madrian

No 14859, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: C93 D14 D18 G11 G28 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cbe and nep-exp
Date: 2009-04
Note: AG AP PE

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Working Paper: How Does Simplified Disclosure Affect Individuals' Mutual Fund Choices? (2009)
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