We believe that improvements in disclosure will not do much to prevent or minimize the effects of future crises. Indeed, the role of disclosure in investment decisions is far more limited, and far less straightforward, than is typically assumed. To caricature a bit for ease of exposition, the straightforward story is as follows: Read carefully, understand what you read, conduct any additional inquiry you deem appropriate, and then decide-if the security seems good, buy it; if not, don't. Also, consider that whoever is selling you the security knows more than you do about it and has an incentive to present it more favorably than it warrants. But many investors, even sophisticated investors, do not start with cautious or neutral presumptions about a security and do not carefully read the disclosure to appraise the security on its merits before deciding whether to invest. As the literature extensively discusses, investors may be eager to buy "the hot new thing" that their peers are buying. Why do the peers buy it? One part of the story may be the old and often-told explanation: some investors tired of "boring" returns, saw an opportunity to supercharge their yields, and believed the perennial pitch made for new financial instruments-that they offered more return than risk. But our aim is not to explain what motivated investor behavior; our aim is to point out what did not sufficiently motivate investor behavior.

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