Measuring (In)Attention to Mutual Fund Fees: Evidence from Experiments

73 Pages Posted: 23 Aug 2018 Last revised: 4 Feb 2021

See all articles by Hugh Hoikwang Kim

Hugh Hoikwang Kim

University of South Carolina, Darla Moore School of Business

Wenhao Yang

Chinese University of Hong Kong, Shenzhen

Date Written: May 3, 2018

Abstract

We structurally estimate investors’ attention to mutual fund fees in an experimental setting with a sample matching the U.S. population. We find that investors, on average, react to fees as if they are 57.4% of the actual size, but the attention level varies substantially across subjects. This under-reaction translates into $57 billion fees inadvertently paid by investors in the U.S. mutual funds market. We also evaluate the efficacy of fee disclosure policies proposed by the U.S. SEC to increase investors’ attention. We find limited effectiveness; they are primarily effective for people with high financial literacy, high income, and urban residence.

Keywords: mutual fund fees, limited attention, price complexity

JEL Classification: G41, G11, G23

Suggested Citation

Kim, Hugh Hoikwang and Yang, Wenhao, Measuring (In)Attention to Mutual Fund Fees: Evidence from Experiments (May 3, 2018). Available at SSRN: https://ssrn.com/abstract=3230081 or http://dx.doi.org/10.2139/ssrn.3230081

Hugh Hoikwang Kim (Contact Author)

University of South Carolina, Darla Moore School of Business ( email )

1014 Greene Street
Columbia, SC 29208
United States

Wenhao Yang

Chinese University of Hong Kong, Shenzhen ( email )

2001 Longxiang Road, Longgang District
Shenzhen, 518172
China

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