Who Is Internationally Diversified? Evidence from the 401(k) Plans of 296 Firms

95 Pages Posted: 31 Mar 2014 Last revised: 12 Apr 2016

Geert Bekaert

Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

Kenton Hoyem

Financial Engines, Inc.

Wei-Yin Hu

Financial Engines, Inc.

Enrichetta Ravina

Columbia Business School - Finance and Economics

Multiple version iconThere are 2 versions of this paper

Date Written: April 7, 2016

Abstract

Drawing on a novel database of the 401(k) plans of 296 firms, we examine the international equity allocations of 3.8 million individuals over the period 2005-2011. We find enormous cross-individual variation, ranging from zero to more than 75%, and strong cohort effects, with younger cohorts investing more internationally than older ones, and each cohort investing more internationally over time. Access to financial advice, lower fees, and more international fund choices are associated with higher international allocations, suggesting a role for plan design and policy. Education, financial literacy, and the fraction of foreign-born population in the ZIP code also have positive effects on international diversification, consistent with explanations based on familiarity bias and information barriers.

Keywords: International Diversification, Microdata, 401(k) Portfolios

JEL Classification: G11, G15, G23

Suggested Citation

Bekaert, Geert and Hoyem, Kenton and Hu, Wei-Yin and Ravina, Enrichetta, Who Is Internationally Diversified? Evidence from the 401(k) Plans of 296 Firms (April 7, 2016). Available at SSRN: https://ssrn.com/abstract=2417976 or http://dx.doi.org/10.2139/ssrn.2417976

Geert Bekaert

Columbia Business School - Finance and Economics ( email )

3022 Broadway
New York, NY 10027
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Kenton Hoyem

Financial Engines, Inc. ( email )

1804 Embarcadero Road
Palo Alto, CA 94303
United States

Wei-Yin Hu

Financial Engines, Inc. ( email )

1050 Enterprise Way, 3rd Floor
Sunnyvale, CA 94089
United States

Enrichetta Ravina (Contact Author)

Columbia Business School - Finance and Economics ( email )

3022 Broadway
New York, NY 10027
United States

HOME PAGE: http://www0.gsb.columbia.edu/faculty/eravina/research.html

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