Mutual Fund Expense Disclosures: A Behavioral Perspective

Mutual funds have enjoyed phenomenal growth with their numbers exceeding the number of public companies and their assets aggregating in excess of $9 trillion. Increasingly they are the investment instrument of choice by the proverbial widows, widowers and orphans, and a few school teachers are included as well. But how are best can that choice be one that is not only informed but informed in a way more likely to elicit a wise decision? This paper examines from a behavioral perspective how regulation can best disclose information related to two key factors for investors to compare competing mutual funds: fund returns and fund expenses. Our analysis reflects that the current disclosure process is deficient because it fails to reflect the insights of research on judgment and decision making, and particularly the need to distinguish between the availability of information and its processability by its user. The message of our article is straightforward: if regulators adhered to the insights provided by our paper, not only investors, but also the fund\u27s directors, would be greatly empowered so that better returns and lower costs could be expected

The Determinants of Investment in Petroleum Reserves and Their Implications for Public Policy

Interest in the determinants of investment in crude oil and natural gas reserves derives from three sources. First, it is always interesting to find a satisfactory explanation of investment behavior in any industry. Second, an aspect of the current concern with the energy crisis is the domestic crude petroleum industry\u27s productive capacity, which is an increasing function of the stock of proved oil and gas reserves. Third, there is a decades-old controversy over the special provisions of the federal corporation income tax law which apply to petroleum producers. The article presents a model of investment in proved reserves in the U.S. crude petroleum producing industry. The empirical results indicate that investment in petroleum reserves depended on three public policies: the special federal tax pro- visions, state market-demand prorationing, and the federal oil import quota. It is possible to draw some tentative policy conclusions from our empirical results, although a complete analysis of the three public policies will require additional empirical estimates

Mutual Fund Expense Disclosures: A Behavioral Perspective

The last few years have not been kind to the mutual fund industry. To be sure, financial indices have improved with the collateral benefit of boosting investor optimism so that the net gain in assets under management by registered investment companies rose by more than ten percent in 2004 to reach $8.6 trillion at the end of the year. But the mutual fund scandals that were first unearthed in fall 2003, with the accusations of late trading involving the Canary Fund, have been compounded by further allegations of late trading involving other funds. These scandals have been joined by pervasive instances of fund advisors looking the other way as important clients were permitted to abuse fund prohibitions against rapid trading. Even the well-established practice of revenue sharing, whereby brokers are rewarded by funds for recommending the fund to their clients, are being reconsidered in the post-Enron era in light of rising concerns over pervasive conflicts of interest within the financial services industry. For example, revenue sharing is now regulated. The various mutual fund scandals have invited public and political focus on the rising level of fees and expenses levied upon funds by their advisors. Thus, 2004 found not only numerous government enforcement actions that resulted in significant financial settlements, but also a tectonic shift in the regulatory quilt that covers the mutual fund industry. Foremost among the regulatory developments for the mutual fund industry is the requirement of heightened transparency of how registered investment companies cast their proxies for their portfolio companies. Greater transparency regarding how funds vote complicates the life of the fund manager by placing the manager between the conflicting needs of gaining admission as one of the acceptable vendors of 401K plans for a portfolio company’s employees and confronting a shareholder-friendly proposal (e.g., separating the position of CEO and board chair) that is opposed by that portfolio company’s management. The SEC also adopted corporate governance changes that essentially compel most funds to raise the number of fund directors who are independent of the fund’s advisor to three-fourths (from the statutorily mandated level of forty percent). And, as will be discussed, in 2004 the SEC expanded the amount of information that funds must disclose regarding fees and other costs that are charged to the fund’s assets. This articles concludes that any reporting of expenses should be placed in a context that invites easy comparisons by investors. The proposal l is not that there should necessarily be more information disclosed to mutual fund investors, but that much more attention should be given to the cognitive processes investors can be expected to employ in their response to the disclosures that are made

Adaptation to ephemeral habitat may overcome natural barriers and severe habitat fragmentation in a fire-dependent species, the Bachman\u27s Sparrow (Peucaea aestivalis)

Bachman\u27s Sparrow (Peucaea aestivalis) is a fire-dependent species that has undergone range-wide population declines in recent decades. We examined genetic diversity in Bachman\u27s Sparrows to determine whether natural barriers have led to distinct population units and to assess the effect of anthropogenic habitat loss and fragmentation. Genetic diversity was examined across the geographic range by genotyping 226 individuals at 18 microsatellite loci and sequencing 48 individuals at mitochondrial and nuclear genes. Multiple analyses consistently demonstrated little genetic structure and high levels of genetic variation, suggesting that populations are panmictic. Based on these genetic data, separate management units/subspecies designations or translocations to promote gene flow among fragmented populations do not appear to be necessary. Panmixia in Bachman\u27s Sparrow may be a consequence of an historical range expansion and retraction. Alternatively, high vagility in Bachman\u27s Sparrow may be an adaptation to the ephemeral, fire-mediated habitat that this species prefers. In recent times, high vagility also appears to have offset inbreeding and loss of genetic diversity in highly fragmented habitat. © 2014 Cerame et al

Spatial patterns in the fruiting bodies of the cellular slime mold Polysphondylium pallidum

During morphogenesis in the slime mold Polysphondylium pallidum cell masses are periodically pinched off from the base of the developing sorogen. These masses round up and differentiate into secondary sorogens, which become radially ordered arrays of secondary fruiting bodies called whorls. Here we describe the morphogenesis of P. pallidum and characterize the spacing of whorls along the central stalk of the fruiting body and the spacing of soro-carps within whorls. We find both are highly regular. We propose that the linear spacing of whorls can be accounted for satisfactorily by a model that views the periodic release of cell masses from the base of the developing sorogen as the consequence of an imbalance between forces that orient amoebae toward the tip of the culminating sorogen, and cohesive forces between randomly moving cells in the basal region of the sorogen, which act as a retarding force. The orderly arrangement of fruiting bodies within whorls can be explained most easily by models that employ short-range activation and lateral inhibition.Peer Reviewedhttp://deepblue.lib.umich.edu/bitstream/2027.42/72498/1/j.1432-0436.1988.tb00200.x.pd