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Mutual Fund Investors: Sharp Enough?

Author

Listed:
  • Palmiter, Alan

    () (Wake Forest School of Law)

  • Taha, Ahmed

    () (Wake Forest School of Law)

Abstract

Who are mutual fund investors? The answer is critical to regulatory policy. The mutual fund industry portrays fund investors as diligent, fairly sophisticated, and guided by professional financial advisors. The SEC paints a more cautious portrait of fund investors, though touts improved disclosure by the fund industry as a sufficient antidote. However, an extensive academic literature finds that fund investors are unaware of the basics of their funds, pay insufficient attention to fund costs, and chase past performance despite little evidence that high past fund returns predict future returns. These findings suggest that policymakers should rethink current regulatory policy. Disclosure may not be enough.

Suggested Citation

  • Palmiter, Alan & Taha, Ahmed, 2008. "Mutual Fund Investors: Sharp Enough?," Journal of Financial Transformation, Capco Institute, vol. 24, pages 113-121.
  • Handle: RePEc:ris:jofitr:0948
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    Citations

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    Cited by:

    1. Jeremy Burke & Angela Hung & Jack Clift & Steven Garber & Joanne K. Yoong, 2015. "Impacts of Conflicts of Interest in the Financial Services Industry," Working Papers WR-1076, RAND Corporation.

    More about this item

    Keywords

    mutual funds; investor protection; cognitive biases;

    JEL classification:

    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • K20 - Law and Economics - - Regulation and Business Law - - - General
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law

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