Obfuscation in mutual funds

• 成果类型: Article
• 署名作者: DeHaan, Ed; Song, Yang; Xie, Chloe; Zhu, Christina
• 署名单位: University of Washington; University of Washington Seattle; Massachusetts Institute of Technology (MIT); University of Pennsylvania
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2021.101429
• 发表日期: 2021
• 关键词: cross-section; performance; disclosure; price; READABILITY; complexity; EVOLUTION; investors; earnings; COSTS

摘要

Mutual funds hold 32% of the U.S. equity market and comprise 58% of retirement savings, yet retail investors consistently make poor choices when selecting funds. Theory suggests poor choices are partially due to fund managers creating unnecessarily complex disclo-sures and fee structures to keep investors uninformed and obfuscate poor performance. An empirical challenge in investigating this strategic obfuscation theory is isolating manipulated complexity from complexity arising from inherent differences across funds. We examine obfuscation among S&P 500 index funds, which have largely the same reg-ulations, risks, and gross returns but charge widely different fees. Using bespoke measures of complexity designed for mutual funds, we find evidence consistent with funds attempting to obfuscate high fees. This study improves our understanding of why investors make poor mutual fund choices and how price dispersion persists among homogeneous index funds. We also discuss insights for mutual fund regulation and academic literature on corporate disclosures. (c) 2021 Elsevier B.V. All rights reserved.