The flypaper effect in individual investor asset allocation
By: James J. Choi, David Laibson, Brigitte C. Madrian
Contributors: Laibson, David I.; Madrian, Brigitte C. (Brigitte Condie); National Bureau of Economic Research
Series: NBER working paper series -- working paper 13656; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 13656.
Publisher: National Bureau of Economic Research
Published: 2007
Place of publication: Cambridge, MA
Language: eng
Format: [electronic resource] /
Description: "We document a flypaper effect in asset allocation: securities received in kind "stick where they hit." We study a firm that twice changed the rules governing the securities in which its 401(k) matching contributions were initially invested.  Both of these rule changes were economically neutral: employees were always free to immediately reallocate their match account balances.  However, we find that most employees neither reallocate their match balances, nor offset employer-initiated changes in the match allocation by adjusting the allocation of their own contributions.  Consequently, these rule changes caused dramatic shifts in participants' 401(k) portfolio risk.  After examining several alternative explanations for this flypaper effect, we conclude that it is largely due to a combination of passivity and mental accounting"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 12/12/2007.

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