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Mutual Fund Investors: Sharp Enough?

Alan Palmiter () and Ahmed Taha ()
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Alan Palmiter: Wake Forest School of Law, Postal: Box 7206 , Winston-Salem, NC 27109
Ahmed Taha: Wake Forest School of Law, Postal: Box 7206 , Winston-Salem, NC 27109

Journal of Financial Transformation, 2008, vol. 24, 113-121

Abstract: Who are mutual fund investors? The answer is critical to regulatory policy. The mutual fund industry portrays fund investors as diligent, fairly sophisticated, and guided by professional financial advisors. The SEC paints a more cautious portrait of fund investors, though touts improved disclosure by the fund industry as a sufficient antidote. However, an extensive academic literature finds that fund investors are unaware of the basics of their funds, pay insufficient attention to fund costs, and chase past performance despite little evidence that high past fund returns predict future returns. These findings suggest that policymakers should rethink current regulatory policy. Disclosure may not be enough.

Keywords: mutual funds; investor protection; cognitive biases (search for similar items in EconPapers)
JEL-codes: D70 G10 G23 K20 K22 (search for similar items in EconPapers)
Date: 2008
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