27 Pages Posted: 13 Apr 2009
Date Written: April 2009
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: 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