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How Does Simplified Disclosure Affect Individuals' Mutual Fund Choices? [report]

John Beshears, James Choi, David Laibson, Brigitte Madrian
2009 unpublished

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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
more » ... er confused about loads, overlook them, or believe their chosen portfolio has an annualized log return that is 24 percentage points higher than the loadminimizing portfolio.
doi:10.3386/w14859 fatcat:pp2iypqlyjdwnowlghr6hfiaga
Citation

John Beshears, James Choi, David Laibson, Brigitte Madrian. "How Does Simplified Disclosure Affect Individuals' Mutual Fund Choices?." (2009)