Title

Mutual fund performance and fund prospectus clarity

Abstract

We conduct a cross-sectional examination of the writing clarity (readability) of mutual fund prospectuses from 20 major US mutual fund families. We focus on the language in the objective/strategy and principal risks sections, using Flesch scores and word counts to measure writing clarity. There is considerable variation in readability among funds and fund families. Flesch readability scores do not vary across fund objective, but within funds, risk discussions are more clear than are discussions of objective/strategy. Generally, the readability of a fund's risk discussion is lower for load funds than no-load funds, and readability increases with fund size and beta and decreases with raw and risk-adjusted three-year returns.

Department(s)

Finance and General Business

Document Type

Article

DOI

https://doi.org/10.1057/palgrave.fsm.4760042

Keywords

mutual funds, readability, disclosure, SEC, communication

Publication Date

2007

Journal Title

Journal of Financial Services Marketing

Link to Full Text

Share

COinS