Company Stock in 401(K) Plans

51 Pages Posted: 26 Jul 2003

See all articles by Gur Huberman

Gur Huberman

Columbia University - Columbia Business School, Finance

Paul Sengmueller

Tilburg University

Date Written: October 1, 2002


Investors in 401(k) plans violate basic principles of diversification by holding a significant fraction of their savings in the form of their employers' equity. This paper characterizes investors' active changes to their company stock investment over time by analyzing new inflows and transfers. Investors seem to base active changes on salient information, paying attention to past returns, volatility, and business performance. Past returns, over a three-year horizon, predict higher inflow allocations and transfers, whereas volatility and business performance only have a weak effect. The sensitivity to past returns is asymmetric, with investors reacting more strongly to positive and above - S&P500 returns.

Suggested Citation

Huberman, Gur and Sengmueller, Paul F., Company Stock in 401(K) Plans (October 1, 2002). EFA 2003 Annual Conference Paper No. 659, Available at SSRN: or

Gur Huberman

Columbia University - Columbia Business School, Finance ( email )

3022 Broadway
New York, NY 10027
United States
(212) 854-5553 (Phone)

Paul F. Sengmueller (Contact Author)

Tilburg University ( email )

Department of Finance
Warandelaan 2
Tilburg, 5037 AB
+31 13 466 2318 (Phone)

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