Transfer Activity in 401(K) Plans

Posted: 26 Nov 2002

See all articles by Julie R. Agnew

Julie R. Agnew

College of William and Mary - Mason School of Business

Pierluigi Balduzzi

Boston College - Carroll School of Management

Date Written: June 7, 2006

Abstract

This paper studies a newly available data set of daily net transfers in several asset classes for roughly 1.5 million 401(k) participants, during the August 1997-September 2002 period. The main stylized fact is that 401(k) transfers correlate strongly and positively with the same-day asset returns in the corresponding asset class. This result is important regardless of the direction of causality. If transfers cause returns, then being able to time the market based on 401(k) transfers would be very profitable. If returns cause transfers, then changing allocations, in response to same-day returns, can have a substantial negative effect on expected utility. Indeed, by using the identification-through-heteroskedasticity technique, we show that there is both an immediate reaction of transfers to returns and an immediate reaction of returns to transfers.

Keywords: 401(k) plans

JEL Classification: G23,G11,C01

Suggested Citation

Richardson Agnew, Julie and Balduzzi, Pierluigi, Transfer Activity in 401(K) Plans (June 7, 2006). AFA 2003 Washington, DC Meetings. Available at SSRN: https://ssrn.com/abstract=342600 or http://dx.doi.org/10.2139/ssrn.342600

Julie Richardson Agnew (Contact Author)

College of William and Mary - Mason School of Business ( email )

P.O. Box 8795
Williamsburg, VA 23187-8795
United States

Pierluigi Balduzzi

Boston College - Carroll School of Management ( email )

Department of Finance
140 Commonwealth Avenue - Fulton Hall 438
Chestnut Hill, MA 02467
United States
617-552-3976 (Phone)
617-552-0431 (Fax)

HOME PAGE: http://www.bc.edu/bc_org/avp/csom/faculty/

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