Individual account investment options and portfolio choice
Subtitle: behavioral lessons from 401(k) plans
By: Jeffrey R. Brown, Nellie Liang, Scott Weisbenner.
Contributors: Liang, J. Nellie; Weisbenner, Scott J.; National Bureau of Economic Research.
Series: NBER working paper series -- no. 13169.; Working paper series (National Bureau of Economic Research) -- working paper no. 13169.
Publisher: National Bureau of Economic Research
Published: 2007
Place of publication: Cambridge, Mass
Language: eng
Number of pages: 42
Subjects: Investments -- Decision making -- Mathematical models; Portfolio management -- Decision making -- Mathematical models; 401(k) plans
Description: "This paper examines how the menu of investment options made available to workers in defined contribution plans influences portfolio choice. Using unique panel data of 401(k) plans in the U.S., we present three principle findings. First, we show that the share of investment options in a particular asset class (i.e., company stock, equities, fixed income, and balanced funds) has a significant effect on aggregate participant portfolio allocations across these asset classes. Second, we document that the vast majority of the new funds added to 401(k) plans are high-cost actively managed equity funds, as opposed to lower-cost equity index funds. Third, because the average share of assets invested in low-cost equity index funds declines with an increase in the number of options, average portfolio expenses increase and average portfolio performance is thus depressed. All of these findings are obtained from a panel data set, enabling us to control for heterogeneity in the investment preferences of workers across firms and across time."--abstract.
Notes: "June 2007"

Includes bibliographical references (p. 29-30).

Also available in PDF from the NBER World Wide Web site (www.nber.org).