Naive Diversification Strategies in Defined Contribution Saving Plans

Richard Thaler and Shlomo Benartzi

American Economic Review, 2001, vol. 91, issue 1, 79-98

Abstract: There is a worldwide trend toward defined contribution saving plans and growing interest in privatized Social Security plans. In both environments, individuals are given some responsibility to make their own asset-allocation decisions, raising concerns about how well they do at this task. This paper investigates one aspect of the task, namely diversification. We show that some investors follow the "1/n strategy": they divide their contributions evenly across the funds offered in the plan. Consistent with this naive notion of diversification, we find that the proportion invested in stocks depends strongly on the proportion of stock funds in the plan.

JEL-codes: G11 G23 H55 (search for similar items in EconPapers)
Date: 2001
Note: DOI: 10.1257/aer.91.1.79
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (379)

Downloads: (external link)
http://www.aeaweb.org/articles.php?doi=10.1257/aer.91.1.79 (application/pdf)
Access to full text is restricted to AEA members and institutional subscribers.

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: https://EconPapers.repec.org/RePEc:aea:aecrev:v:91:y:2001:i:1:p:79-98

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

American Economic Review is currently edited by Esther Duflo

More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().