Understanding Trading Behavior in 401(k) Plans
We use a new database covering 1.2 million active participants to study trading activities in 1,530 defined contribution retirement plans. Descriptive statistics and regression analysis indicate some interesting trading patterns. First, we show that trading activity in 401(k) accounts is very limited: only 20% of participants ever reshuffled their portfolios in two years. Second, demographic characteristics are strongly associated with trading activities: traders are older, wealthier, more highly paid, male employees with longer plan tenure. Finally, we find that plan design factors, such as the number of funds offered, loan availability, and specific fund-families offered have significant impacts on 401(k) plan participants’ trading behavior. Moreover, on-line access channels stimulate participants to trade more frequently, although they do not increase turnover ratio as much. We conclude that plan design features are crucial in sharing trading patterns in 401(k) plans.
|Date of creation:||Sep 2006|
|Date of revision:|
|Contact details of provider:|| Postal: P.O. Box 1248, Ann Arbor, MI 48104|
Phone: (734) 615-0422
Fax: (734) 647-4575
Web page: http://www.mrrc.isr.umich.edu/publications/papers/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Mervyn A. King & Jonathan I. Leape, 1987. "Asset Accumulation, Information, and the Life Cycle," NBER Working Papers 2392, National Bureau of Economic Research, Inc.
- Olivia S. Mitchell & Stephen P. Utkus & Tongxuan (Stella) Yang, 2005.
"Turning Workers into Savers? Incentives, Liquidity, and Choice in 401(k) Plan Design,"
NBER Working Papers
11726, National Bureau of Economic Research, Inc.
- Mitchell, Olivia S. & Utkus, Stephen P. & Yang, Tongxuan (Stella), 2007. "Turning Workers into Savers? Incentives, Liquidity, and Choice in 401(k) Plan Design," National Tax Journal, National Tax Association, vol. 60(3), pages 469-89, September.
- Richard H. Thaler & Shlomo Benartzi, 2001. "Naive Diversification Strategies in Defined Contribution Saving Plans," American Economic Review, American Economic Association, vol. 91(1), pages 79-98, March.
- Simon Gervais & Terrance Odean, .
"Learning To Be Overconfident,"
Rodney L. White Center for Financial Research Working Papers
5-97, Wharton School Rodney L. White Center for Financial Research.
- Simon Gervais & Terrance Odean, . "Learning To Be Overconfident," Rodney L. White Center for Financial Research Working Papers 05-97, Wharton School Rodney L. White Center for Financial Research.
- Douglas D. Bernheim, . "Financial Illiteracy, Education, and Retirement Saving," Pension Research Council Working Papers 96-7, Wharton School Pension Research Council, University of Pennsylvania.
- William N. Goetzmann & Massimo Massa & K. Geert Rouwenhorst, 2000.
"Behavioral Factors in Mutual Fund Flows,"
Yale School of Management Working Papers
ysm135, Yale School of Management.
- Samuelson, Paul A, 1969. "Lifetime Portfolio Selection by Dynamic Stochastic Programming," The Review of Economics and Statistics, MIT Press, vol. 51(3), pages 239-46, August.
- 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.
- William E. Even & David A. Macpherson, 2004. "Determinants and Effects of Employer Matching Contributions in 401(k) Plans," Labor and Demography 0405001, EconWPA.
When requesting a correction, please mention this item's handle: RePEc:mrr:papers:wp125. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (MRRC Administrator)
If references are entirely missing, you can add them using this form.