How Does Simplified Disclosure Affect Individuals' Mutual Fund Choices?
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.
Non-Technical Summaries
- ...the Summary Prospectus reduces the amount of time spent on the investment decision, but there does not seem to be any resulting change...
Published Versions
How Does Simplified Disclosure Affect Individuals' Mutual Fund Choices?, John Beshears, James J. Choi, David Laibson, Brigitte C. Madrian. in Explorations in the Economics of Aging, Wise. 2011
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