The role of investors’ objective financial knowledge on the assessment of risk disclosures in mutual fund advertisements

Climate Information in Retail Investors’ Decision-Making: Evidence From a Choice Experiment

“…The promise of labeling may also hold true in the specific context of SI, as insufficient or overly complex information and inadequate information processing and transfer have been identified as major barriers to more engagement in SI (e.g., Benson & Humphrey, 2008;Hummels & Timmer, 2004;Rhodes, 2010;Schrader, 2006). In the investment context, however, labeling research is still fragmented and usually limited to standard financial information (e.g., Drescher, Roosen, & Marette, 2014;Hüsser, 2015). Rare exceptions exist in the form of studies on the impact of ethical or sustainability labels on investment decisions, but these do not address the issue of label design effects (e.g., Døskeland & Pedersen, 2016;Gutsche, Dai, & Zwergel, 2015).…”

Key investor information disclosure regulation and retail mutual fund flows in the Finnish market

“…Ippolito, 1992;Gruber, 1996;Sirri and Tufano, 1998). Experimental studies of short-form disclosure also indicate that retail investors focus on past performance when they make investment decisions (H€ usser andWirth, 2013, 2014). However, experimental evidence also suggests that a mandated disclosure is ineffective in altering return expectations, regardless of investor clientele, whereas a stark warning label affects unsophisticated investors' expectations, but not those of sophisticated investors (H€ usser, 2015).…”

“…However, several experimental studies suggest that retail investors do not benefit from the short-form disclosure that resembles the Key Investor Information Document (UCITS KIID), as mandated by UCITS IV (e.g. Oehler et al, 2014;H€ usser, 2015). Moreover, little attention has been paid to how the adoption of the UCITS KIID manifests itself in real-world mutual fund markets (Moloney, 2014).…”

“…However, experimental research has yielded mixed results on the effects of short-form disclosure on retail investors. While a simplified disclosure document increases willingness to invest in mutual funds (Arora and Chakraborty, 2021), it also appears to be unhelpful or of little value to retail investors (Oehler et al, 2014), or makes no difference to the retail investor's decision-making (Beshears et al, 2011;H€ usser, 2015). As regards the content of disclosures, consumers are sensitive to how information is presented in the document (Ceravolo et al, 2019), including the way in which key metrics such as fees (Thorp et al, 2020) and risk/return profile (Bussoli et al, 2021) are presented.…”

“…First, to our best knowledge, this paper is the first to report empirical evidence on correlations between the objectives of UCITS IV and mutual fund flows, whereas previous studies have relied on experiments that model its impacts on investors (e.g. H€ usser and Wirth, 2013;H€ usser and Wirth, 2014;Oehler et al, 2014;H€ usser, 2015; see also Muchhalfen and Gaschler, 2021 in the PRIIPs KID context). Second, this paper adds to the empirical literature on the real-world impacts of financial regulation on the mutual funds market (Golec, 2003;Golec and Starks, 2004;Badoer et al, 2020).…”