How Does Simplified Disclosure Affect Individuals' Mutual Fund Choices?

27 Pages Posted: 8 May 2009 Last revised: 24 Jun 2009

See all articles by John Beshears

John Beshears

Harvard University - Business School (HBS); 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

Brigham Young University Marriott School of Business; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: March 27, 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 and Choi, James J. and Laibson, David I. and Madrian, Brigitte C., How Does Simplified Disclosure Affect Individuals' Mutual Fund Choices? (March 27, 2009). HKS Working Paper No. RWP09_16; Yale ICF Working Paper No. 09-05. Available at SSRN: https://ssrn.com/abstract=1400943 or http://dx.doi.org/10.2139/ssrn.1400943

John Beshears (Contact Author)

Harvard University - Business School (HBS) ( email )

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James J. Choi

Yale School of Management ( 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

Brigham Young University Marriott School of Business ( email )

Provo, UT 84602
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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