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Playing with your future: Who gambles in defined-contribution pension plans?

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  • Clark, Gordon L.
  • Fiaschetti, Maurizio
  • Tufano, Peter
  • Viehs, Michael

Abstract

In this article, we investigate the relationship between volatility in the stock market and the trading behaviour of employees in defined-contribution (DC) pension schemes. We found that 10% of our sample exhibited compulsive gambling behaviour; in other words, they both ‘fed’ and ‘fed-off’ volatility, and that their individual attributes such as gender, experience in the firm and age clearly influenced their trading behaviour. Our findings shed new light on the behavioural drivers of financial decision-making in a saving-for-retirement setting, and on the crucial importance of the need for the financial industry and policy makers to address the growing onus put on ill-equipped non-professional financial decision makers.

Suggested Citation

  • Clark, Gordon L. & Fiaschetti, Maurizio & Tufano, Peter & Viehs, Michael, 2018. "Playing with your future: Who gambles in defined-contribution pension plans?," International Review of Financial Analysis, Elsevier, vol. 60(C), pages 213-225.
    • Handle: RePEc:eee:finana:v:60:y:2018:i:c:p:213-225
    DOI: 10.1016/j.irfa.2018.09.007
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    References listed on IDEAS

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    1. Dong, Bing & Xu, Wei & Sevic, Aleksandar & Sevic, Zeljko, 2020. "Efficient willow tree method for variable annuities valuation and risk management☆," International Review of Financial Analysis, Elsevier, vol. 68(C).

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    More about this item

    Keywords

    Volatility; Retail investors; Effect of experience; Financial decision-making; Retirement;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis

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