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Publications
  • 2011
  • Chapter
  • Explorations in the Economics of Aging

How Does Simplified Disclosure Affect Individuals' Mutual Fund Choices?

By: John Beshears, James J. Choi, David Laibson and Brigitte C. Madrian
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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 loadminimizing portfolio.

Keywords

Information; Corporate Disclosure; Decision Choices And Conditions; Consumer Behavior; Retirement; Personal Finance; Investment Funds; Microeconomics

Citation

Beshears, John, James J. Choi, David Laibson, and Brigitte C. Madrian. "How Does Simplified Disclosure Affect Individuals' Mutual Fund Choices?" In Explorations in the Economics of Aging, edited by David A. Wise, 75–96. Chicago: University of Chicago Press, 2011.
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About The Author

John Beshears

Negotiation, Organizations & Markets
→More Publications

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More from the Authors
  • Social Salary Setting at Spiber By: Ashley Whillans and John Beshears
  • Nudging: Progress to Date and Future Directions By: John Beshears and Harry Kosowsky
  • Do Physician Incentives Increase Patient Medication Adherence? By: Edward Kong, John Beshears, David Laibson, Brigitte Madrian, Kevin Volpp, George Loewenstein, Jonathan Kolstad and James J. Choi
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