How Does Simplified Disclosure Affect Individuals' Mutual Fund Choices?

27 Pages Posted: 13 Apr 2009  

John L. Beshears

Harvard Business School; National Bureau of Economic Research (NBER)

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)

Multiple version iconThere are 2 versions of this paper

Date Written: April 2009

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.

Suggested Citation

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

John Leonard Beshears

Harvard Business School ( email )

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National Bureau of Economic Research (NBER) ( email )

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James J. Choi (Contact Author)

Yale School of Management ( email )

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National Bureau of Economic Research (NBER) ( email )

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David I. Laibson

Harvard University - Department of Economics ( email )

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National Bureau of Economic Research (NBER) ( email )

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Brigitte C. Madrian

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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