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Defined Contribution Pension Plans: Sticky or Discerning Money?

Listed author(s):
  • Clemens Sialm
  • Laura Starks
  • Hanjiang Zhang

Participants in defined contribution (DC) retirement plans rarely adjust their portfolio allocations, suggesting that their investment choices and consequent money flows are sticky and not discerning. Yet, the participants' inertia could be offset by the DC plan sponsors, who adjust the plan's investment options. We examine these countervailing influences on flows into U.S. mutual funds. We find that flows into funds that derive from DC assets are more volatile and exhibit more performance sensitivity than non-DC flows, primarily due to the adjustments of the investment options by the plan sponsors. Thus, DC retirement money is less sticky and more discerning.

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File URL: http://www.nber.org/papers/w19569.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 19569.

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Date of creation: Oct 2013
Publication status: published as Clemens Sialm & Laura T. Starks & Hanjiang Zhang, 2015. "Defined Contribution Pension Plans: Sticky or Discerning Money?," Journal of Finance, American Finance Association, vol. 70(2), pages 805-838, 04.
Handle: RePEc:nbr:nberwo:19569
Note: AG AP CF PE
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