Employees' Investment Decisions about Company Stock

James Jinwoo Choi, David Laibson (), Brigitte C. Madrian and Andrew Metrick ()

No 10228, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study the relationship between past returns on a company's stock and the level of investment in that stock by the participants in that company's 401(k) plan. Using data on 94,191 plan participants, we analyze several different decision points: the initial fraction of savings allocated to company stock, the changes in this fraction, and the reallocations of portfolio holdings across different asset classes. Like Benartzi (2001), we find that high past returns on company stock induce participants to allocate more of their contributions to company stock. We also find, however, that high returns on company stock have the opposite effect on reallocations of portfolio holdings, with high returns leading to shifts away from company stock and into other forms of equity. Overall, for company stock decisions, participants in our sample appear to be momentum investors when making contribution decisions and contrarian investors when making trading decisions.

JEL-codes: E2 G1 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn, nep-fin and nep-mac
Date: 2004-01
Note: AP AG
View list of references View citations in EconPapers

Downloads: (external link)
http://www.nber.org/papers/w10228.pdf (application/pdf)
Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:nbr:nberwo:10228

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w10228
The price is Paper copy available by mail.

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc
Address: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Contact information at EDIRC.
Series data maintained by ().