Do Behavioral Biases Vary across Individuals? Evidence from Individual Level 401(k) Data

Julie R. Agnew

Journal of Financial and Quantitative Analysis, 2006, vol. 41, issue 4, 939-962

Abstract: This paper investigates whether some individuals are prone to behavioral biases in their 401(k) investments. Using demographic data and allocation information for over 73,000 employees, I examine two allocation biases and a participation bias. The findings suggest that higher salaried employees tend to make significantly better choices. Participants who earn $100, 000 hold 12. 7% less in company stock, are 3% less likely to follow the framing 1/n heuristic, and are 37.7% more likely to participate than those earning $46, 000. Women make better choices in two of the three cases and I find evidence of mental accounting.

Date: 2006
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