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

Author

Listed:
  • Tomoki Kitamura

    () (NLI Research Institute and Aoyama Gakuin University)

  • Kunio Nakashima

    () (NLI Research Institute)

Abstract

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.

Suggested Citation

  • Tomoki Kitamura & Kunio Nakashima, 2009. "Changes in Equity Investment of Japan's Households After the Introduction of Defined Contribution Plans," Economics Bulletin, AccessEcon, vol. 29(3), pages 2256-2264.
  • Handle: RePEc:ebl:ecbull:eb-09-00286
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2009/Volume29/EB-09-V29-I3-P71.pdf
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    References listed on IDEAS

    as
    1. 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.
    2. Brigitte C. Madrian & Dennis F. Shea, 2001. "The Power of Suggestion: Inertia in 401(k) Participation and Savings Behavior," The Quarterly Journal of Economics, Oxford University Press, vol. 116(4), pages 1149-1187.
    3. Brad M. Barber & Terrance Odean, 2001. "Boys will be Boys: Gender, Overconfidence, and Common Stock Investment," The Quarterly Journal of Economics, Oxford University Press, vol. 116(1), pages 261-292.
    4. Shum, Pauline & Faig, Miquel, 2006. "What explains household stock holdings?," Journal of Banking & Finance, Elsevier, vol. 30(9), pages 2579-2597, September.
    5. 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.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Equity Allocation; Defined Contribution Plans;

    JEL classification:

    • G0 - Financial Economics - - General

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