Do Pension Plans with Participant Investment Choice Teach Households to Hold More Equity?

37 Pages Posted: 24 Jun 2000

See all articles by Scott J. Weisbenner

Scott J. Weisbenner

University of Illinois at Urbana-Champaign - Department of Finance; National Bureau of Economic Research (NBER)

Date Written: November 16, 1999

Abstract

Some retirement plans allow the participant to choose how funds are invested. Having to direct investments may provide the participant with financial education. This paper finds that households covered by pension plans in which the employee chooses investments are significantly more apt to hold stock outside of their retirement plan relative to households with pension plans offering no such choice. The effect of investment choice upon non-pension asset allocation cannot be explained by portfolio rebalancing or differences in income and saving preferences across households. This provides some evidence that the design of a pension plan can impact an employee's financial decisions.

JEL Classification: H31, J33, G11

Suggested Citation

Weisbenner, Scott J., Do Pension Plans with Participant Investment Choice Teach Households to Hold More Equity? (November 16, 1999). Available at SSRN: https://ssrn.com/abstract=205035 or http://dx.doi.org/10.2139/ssrn.205035

Scott J. Weisbenner (Contact Author)

University of Illinois at Urbana-Champaign - Department of Finance ( email )

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