We are delighted to announce the next seminar in the series - Micro and Macro Implications of Household Behaviour and Financial Decision-Making

The seminar will run from 3:30 to 5:00 pm (BST) on Friday 28 October 2022

Mark Egan presenting "What Drives Variation in Investor Portfolios? Evidence from Retirement Plans" with discussion by Paolo Sodini and Stavros Panageas

Abstract: We study empirical patterns in investment behavior using a comprehensive data set of defined contribution plans. Using plan-level portfolio allocation data for the near universe of 401(k) plans over the period 2009-2019, we document substantial differences in investment behavior across plans. Plans with wealthier and more educated participants tend to have higher equity exposure while plans with more retirees and minorities tend to have lower equity exposure. These patterns cannot be explained by differences in 401(k) menus or participation costs. To help interpret these facts, we use a revealed preference approach to estimate investors' expectations of stock market returns and risk aversion, where we allow investors to have heterogeneous risk aversion and subjective and potentially biased beliefs. We find that there is substantial variation in both beliefs and risk aversion across investors and over time, and that both sources of variation help explain investors' portfolio decisions. We also provide new evidence to understand how investors form beliefs. We find that investors extrapolate beliefs from past fund returns even when they initially allocate portfolios in new plans. We also find that investors extrapolate beliefs about the market from the past performance of their employer, which suggests that investor experience helps shape beliefs.

Register to receive the Zoom Link here

Further details can be found on the Seminar Webpage here

Richard Blundell
Michael Haliassos
Christopher Hansman
Yigitcan Karabulut
Peter Levell
Benjamin Moll
Tarun Ramadorai
Pol Simpson