Defined Contribution Pension Plans: Sticky or Discerning Money?

Clemens Sialm, Laura T. Starks and Hanjiang Zhang

Journal of Finance, 2015, vol. 70, issue 2, 805-838

Abstract: type="main">

Participants in defined contribution (DC) retirement plans rarely adjust their portfolio allocations, suggesting that their investment choices and consequent money flows are sticky and not discerning. However, participants’ inertia could be offset by DC plan sponsors, who adjust the plan's investment options. We examine these countervailing influences on flows into U.S. mutual funds. We find that flows into funds from DC assets are more volatile and exhibit more performance sensitivity than non-DC flows, primarily due to adjustments to the investment options by the plan sponsors. Thus, DC retirement money is less sticky and more discerning than non-DC money.

Date: 2015
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Related works:
Working Paper: Defined Contribution Pension Plans: Sticky or Discerning Money? (2014)
Working Paper: Defined Contribution Pension Plans: Sticky or Discerning Money? (2013)
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