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Changes in Equity Investment of Japan's Households After the Introduction of Defined Contribution Plans

  • Tomoki Kitamura

    ()

    (NLI Research Institute and Aoyama Gakuin University)

  • Kunio Nakashima

    ()

    (NLI Research Institute)

Registered author(s):

    Compared to other advanced economies, Japan's households allocate fewer financial assets to equity investment. We examine the possibility that the introduction of self-directed defined contribution plans could stimulate more equity investment by exposing investors to investment education and experience in equity investment. Using original data obtained from individual investors, we analyze factors associated with current and expected future equity allocation. Results indicate that although DC plan participation has no significant effect on current equity allocation, it significantly increases the expected future equity allocation. Financial asset holdings have a significant positive effect on current and expected future equity allocation. Interestingly, however, subjective expectations of future income and pension benefit, which are key factors in the life cycle model, do not have any significant impact.

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    File URL: http://www.accessecon.com/Pubs/EB/2009/Volume29/EB-09-V29-I3-P71.pdf
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    Article provided by AccessEcon in its journal Economics Bulletin.

    Volume (Year): 29 (2009)
    Issue (Month): 3 ()
    Pages: 2256-2264

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    Handle: RePEc:ebl:ecbull:eb-09-00286
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    1. Brigitte C. Madrian & Dennis F. Shea, 2001. "THE POWER OF SUGGESTION: INERTIA IN 401(k) PARTICIPATION AND SAVINGS BEHAVIOR," The Quarterly Journal of Economics, MIT Press, vol. 116(4), pages 1149-1187, November.
    2. Brad M. Barber & Terrance Odean, 2001. "Boys Will Be Boys: Gender, Overconfidence, And Common Stock Investment," The Quarterly Journal of Economics, MIT Press, vol. 116(1), pages 261-292, February.
    3. Miquel Faig & Pauline Shum, 2006. "What Explains Household Stock Holdings?," Working Papers tecipa-218, University of Toronto, Department of Economics.
    4. Bodie, Zvi & Merton, Robert C. & Samuelson, William F., 1992. "Labor supply flexibility and portfolio choice in a life cycle model," Journal of Economic Dynamics and Control, Elsevier, vol. 16(3-4), pages 427-449.
    5. Julie Agnew & Pierluigi Balduzzi & Annika Sundén, 2003. "Portfolio Choice and Trading in a Large 401(k) Plan," American Economic Review, American Economic Association, vol. 93(1), pages 193-215, March.
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