Recent mandates implemented by U.S. regulators have simplified the language used in financial disclosure documents. However, prior research has found that simplified disclosure alone may not be sufficient to improve investor outcomes. In this brief, researchers from New York University and the University of Southern California describe an experiment to examine the use of social content to improve investor comprehension and understanding of financial prospectuses. The research suggests that exposing consumers to the online comments of other users, known as social annotation, may be an effective way to help non-expert investors make better-informed decisions. This research was conducted with a grant from the FINRA Foundation.
Authors: Jeremy Burke (USC), Oded Nov (NYU) and Junius Guarantne (NYU)