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How Does Simplified Disclosure Affect Individuals' Mutual Fund Choices?


John Leonard Beshears


National Bureau of Economic Research (NBER); Stanford Graduate School of Business

James J. Choi


Yale School of Management; National Bureau of Economic Research (NBER)

David Laibson


Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Brigitte C. Madrian


Harvard University - Harvard Kennedy School (HKS); National Bureau of Economic Research (NBER)
April 2009

NBER Working Paper No. w14859

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.

Number of Pages in PDF File: 27

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Date posted: April 13, 2009  

Suggested Citation

Beshears, John Leonard, Choi, James J., Laibson, David I. and Madrian, Brigitte C., How Does Simplified Disclosure Affect Individuals' Mutual Fund Choices? (April 2009). NBER Working Paper No. w14859. Available at SSRN: http://ssrn.com/abstract=1376182

Contact Information

John Leonard Beshears
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Stanford Graduate School of Business ( email )
518 Memorial Way
Stanford, CA 94305-5015
United States
James J. Choi (Contact Author)
Yale School of Management ( email )
135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
David I. Laibson
Harvard University - Department of Economics ( email )
Littauer Center
Room M-14
Cambridge, MA 02138
United States
617-496-3402 (Phone)
617-495-8570 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Brigitte Madrian
Harvard University - Harvard Kennedy School (HKS) ( email )
79 John F. Kennedy Street
Cambridge, MA 02138
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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