The Reluctant Retirement Trader: Do Asset Returns Overcome Inertia?
College of William and Mary - Mason School of Business
Boston College - Carroll School of Management
June 21, 2012
Networks Financial Institute: Working Paper Series: 2012-WP-01
We study a new and unique data set of daily aggregate transfers of funds between mutual funds held in 401(k) accounts. We find that 401(k) transfers correlate strongly and positively with contemporaneous daily returns in the corresponding asset class. GMM estimation based on the identification-through-heteroskedasticity methodology attributes part of this correlation to investors following positive-feedback strategies. A simulation shows that these strategies may lead to substantial utility costs. These findings have implications for 401(k) plan sponsors.
Number of Pages in PDF File: 36working papers series
Date posted: June 21, 2012
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