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https://ssrn.com/abstract=1094834
 
 

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The Inattentive Participant: Portfolio Trading Behavior in 401(K) Plans


Olivia S. Mitchell


University of Pennsylvania - The Wharton School; National Bureau of Economic Research (NBER)

Gary R. Mottola


Research Director FINRA Foundation

Stephen P. Utkus


The Vanguard Group, Inc. - Center for Retirement Research

Takeshi Yamaguchi


University of Pennsylvania - The Wharton School

June 2006

Michigan Retirement Research Center Research Paper No. WP 2006-115

Abstract:     
Most workers in defined contribution retirement plans are inattentive portfolio managers: only a few engage in any trading at all, and only a tiny minority trades actively. Using a rich new dataset on 1.2 million workers in over 1,500 plans, we find that most 401(k) plan participants are characterized by profound inertia. Almost all participants (80%) initiate no trades, and an additional 11% makes only a single trade, in a two-year period. Even among traders, portfolio turnover rates are one-third the rate of professional money managers. Those who trade in their 401(k) plans are more affluent older men, with higher incomes and longer job tenure. They tend to use the internet for 401(k) account access, hold a larger number of investment options, and are more likely to hold active equity funds rather than index or lifecycle funds. Some plan features, including offering own-employer stock, also raise trading levels.

Number of Pages in PDF File: 40


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Date posted: February 19, 2008  

Suggested Citation

Mitchell, Olivia S. and Mottola, Gary R. and Utkus, Stephen P. and Yamaguchi, Takeshi, The Inattentive Participant: Portfolio Trading Behavior in 401(K) Plans (June 2006). Michigan Retirement Research Center Research Paper No. WP 2006-115. Available at SSRN: https://ssrn.com/abstract=1094834 or http://dx.doi.org/10.2139/ssrn.1094834

Contact Information

Olivia S. Mitchell (Contact Author)
University of Pennsylvania - The Wharton School ( email )
Philadelphia, PA 19104-6365
United States

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Gary R. Mottola
Research Director FINRA Foundation ( email )
1735 K ST NW
Washington, DC 20006
United States
HOME PAGE: http://www.finrafoundation.org
Stephen P. Utkus
The Vanguard Group, Inc. - Center for Retirement Research ( email )
100 Vanguard Boulevard, M38
Malvern, PA 19355
United States
610-669-6308 (Phone)
Takeshi Yamaguchi
University of Pennsylvania - The Wharton School ( email )
3641 Locust Walk
Philadelphia, PA 19104-6365
United States

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