Defined Contribution Pension Plans: Sticky or Discerning Money?

55 Pages Posted: 25 Oct 2013

See all articles by Clemens Sialm

Clemens Sialm

University of Texas at Austin - McCombs School of Business; National Bureau of Economic Research (NBER); AQR Capital Management, LLC

Laura T. Starks

University of Texas at Austin - Department of Finance

Hanjiang Zhang

Washington State University - Carson College of Business

Multiple version iconThere are 2 versions of this paper

Date Written: October 2013

Abstract

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.

Suggested Citation

Sialm, Clemens and Starks, Laura T. and Zhang, Hanjiang, Defined Contribution Pension Plans: Sticky or Discerning Money? (October 2013). NBER Working Paper No. w19569. Available at SSRN: https://ssrn.com/abstract=2345064

Clemens Sialm (Contact Author)

University of Texas at Austin - McCombs School of Business ( email )

Austin, TX 78712
United States

HOME PAGE: http://faculty.mccombs.utexas.edu/Clemens.Sialm/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

AQR Capital Management, LLC ( email )

Greenwich, CT
United States

Laura T. Starks

University of Texas at Austin - Department of Finance ( email )

Red McCombs School of Business
Austin, TX 78712
United States
512-471-5899 (Phone)
512-471-5073 (Fax)

Hanjiang Zhang

Washington State University - Carson College of Business ( email )

Wilson Rd.
College of Business
Pullman, WA 99164
United States

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