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How Does Simplified Disclosure Affect Individuals' Mutual Fund Choices?
John Beshears National Bureau of Economic Research (NBER); Harvard University - Department of Economics 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 - John F. Kennedy School of Government; National Bureau of Economic Research (NBER) March 27, 2009 HKS Working Paper No. RWP09_16 Yale ICF Working Paper No. 09-05 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. Working Paper Series Date posted: May 08, 2009 ; Last revised: June 24, 2009Suggested CitationContact Information
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