It Pays to Set the Menu: Mutual Fund Investment Options in 401(k) Plans
AbstractThis paper investigates whether mutual fund families acting as trustees of 401(k) plans display favoritism toward their own funds. Using a hand-collected dataset on retirement investment options, we show that poorly-performing funds are less likely to be removed from and more likely to be added to a 401(k) menu if they are affiliated with the plan trustee. We find no evidence that plan participants undo this affiliation bias through their investment choices. Finally, the subsequent performance of poorly-performing affiliated funds indicates that these trustee decisions are not information driven and are costly to retirement savers.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18764.
Date of creation: Feb 2013
Date of revision:
Note: AG AP CF PE
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Find related papers by JEL classification:
- G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
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