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Which individuals make active investment decisions in the new Swedish pension system?

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Author Info

  • Engström, Stefan

    ()
    (Dept. of Finance, Stockholm School of Economics)

  • Westerberg, Anna

    ()
    (National Social Insurance Board)

Abstract

This paper provides a detailed examination of individuals' active participation in a new public and mandatory defined contribution pension system. The new pension system was launched in the fall of 2000 and entitles Sweden's workforce of 4.4 million individuals to invest part of their individual pension account in mutual funds. Our findings show that the system is associated with a reversed investment behavior compared with studies of 401(k) plans; that is, individuals tend to make their own investment decisions. Contrary to U.S studies, we also find that women and younger individuals are more likely than men and older individuals to make an active investment decision.

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Bibliographic Info

Paper provided by Stockholm School of Economics in its series Working Paper Series in Economics and Finance with number 527.

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Length: 29 pages
Date of creation: 07 May 2003
Date of revision: 21 Jul 2003
Publication status: Published in Journal of Pension Economics and Finance, 2003, pages 225-245.
Handle: RePEc:hhs:hastef:0527

Contact details of provider:
Postal: The Economic Research Institute, Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden
Phone: +46-(0)8-736 90 00
Fax: +46-(0)8-31 01 57
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Web page: http://www.hhs.se/
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Keywords: Mutual funds; portfolio choice; pension system; status quo bias;

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References

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  1. Samuelson, William & Zeckhauser, Richard, 1988. " Status Quo Bias in Decision Making," Journal of Risk and Uncertainty, Springer, Springer, vol. 1(1), pages 7-59, March.
  2. Patrick J. Bayer & B. Douglas Bernheim & John Karl Scholz, 1996. "The Effects of Financial Education in the Workplace: Evidence from a Survey of Employers," NBER Working Papers 5655, National Bureau of Economic Research, Inc.
  3. William F. Bassett & Michael J. Fleming & Anthony P. Rodrigues, 1998. "How workers use 401(k) plans: the participation, contribution, and withdrawal decisions," Staff Reports, Federal Reserve Bank of New York 38, Federal Reserve Bank of New York.
  4. James J. Choi & David Laibson & Brigitte C. Madrian & Andrew Metrick, 2001. "Defined Contribution Pensions: Plan Rules, Participant Decisions, and the Path of Least Resistance," NBER Working Papers 8655, National Bureau of Economic Research, Inc.
  5. Sunden, Annika E & Surette, Brian J, 1998. "Gender Differences in the Allocation of Assets in Retirement Savings Plans," American Economic Review, American Economic Association, American Economic Association, vol. 88(2), pages 207-11, May.
  6. Brad M. Barber & Terrance Odean, 2001. "Boys Will Be Boys: Gender, Overconfidence, And Common Stock Investment," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 116(1), pages 261-292, February.
  7. Merton, Robert C, 1987. " A Simple Model of Capital Market Equilibrium with Incomplete Information," Journal of Finance, American Finance Association, American Finance Association, vol. 42(3), pages 483-510, July.
  8. Mark Grinblatt, 2001. "How Distance, Language, and Culture Influence Stockholdings and Trades," Journal of Finance, American Finance Association, American Finance Association, vol. 56(3), pages 1053-1073, 06.
  9. Huberman, Gur, 2001. "Familiarity Breeds Investment," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 14(3), pages 659-80.
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Citations

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Cited by:
  1. Karlsson, Anders & Norden, Lars, 2007. "Home sweet home: Home bias and international diversification among individual investors," Journal of Banking & Finance, Elsevier, Elsevier, vol. 31(2), pages 317-333, February.
  2. Dimitrios Christelis & Tullio Jappelli & Mario Padula, 2006. "Cognitive Abilities and Portfolio Choice," CSEF Working Papers, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy 157, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  3. Kayam, Saime S. & Parkın, Mehmet Koray & Çeliktopuz, Merih, 2013. "Features that influence the exit decision from the private pension system in Turkey," MPRA Paper 50933, University Library of Munich, Germany.
  4. Engström, Stefan & Westerberg, Anna, 2004. "Information Costs and Mutual Fund Flows," Working Paper Series in Economics and Finance, Stockholm School of Economics 555, Stockholm School of Economics.
  5. McQueen, Grant & Stenkrona, Anders, 2012. "The home-institution bias," Journal of Banking & Finance, Elsevier, Elsevier, vol. 36(6), pages 1627-1638.
  6. Tubetov, Dulat & Maart, Syster Christin & Musshoff, Oliver, 2012. "The comparison of investment behaviors of Kazakhstani and German farmers: An experimental approach," 86th Annual Conference, April 16-18, 2012, Warwick University, Coventry, UK, Agricultural Economics Society 134770, Agricultural Economics Society.
  7. Craig Speelman & Marilyn Clark-Murphy & Paul Gerrans, 2013. "Decision Making Clusters in Retirement Savings: Gender Differences Dominate," Journal of Family and Economic Issues, Springer, Springer, vol. 34(3), pages 329-339, September.
  8. Tubetov, Dulat & Maart, Syster Christin & Musshoff, Oliver, 2012. "Experimental examination of land investment decisions with volatile returns A comparison between Kazakhstani and German farmers," 123rd Seminar, February 23-24, 2012, Dublin, Ireland, European Association of Agricultural Economists 122454, European Association of Agricultural Economists.
  9. Hedesstrom, Ted Martin & Svedsater, Henrik & Garling, Tommy, 2007. "Determinants of the use of heuristic choice rules in the Swedish Premium Pension Scheme: An Internet-based survey," Journal of Economic Psychology, Elsevier, Elsevier, vol. 28(1), pages 113-126, January.
  10. Hagen, Johannes, 2013. "A History of the Swedish Pension System," Working Paper Series, Center for Fiscal Studies, Uppsala University, Department of Economics 2013:7, Uppsala University, Department of Economics.
  11. Säve-Söderbergh, Jenny, 2005. "Who is Willing to Let Ethics Guide His Economic Decision-Making? Evidence from Individual Investments in Ethical Funds," Working Paper Series, Swedish Institute for Social Research 7/2005, Swedish Institute for Social Research.

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