Stock market returns and annuitization

Alessandro Previtero

Journal of Financial Economics, 2014, vol. 113, issue 2, 202-214

Abstract: I investigate the strong negative relation between recent stock returns and the annuitization of retirement savings using a novel data set with over 100,000 actual payout decisions. After controlling for several standard explanations (e.g., wealth effects), I present evidence supporting naïve beliefs and extrapolation from past returns. The effect of recent returns on annuitization dramatically increases with age, confirming that the elderly rely most heavily on recent information. My results provide insights into how beliefs are formed in old age and have implications for the design of public policies seeking to promote annuitization.

Keywords: Annuities; Retirement income; Myopic extrapolation; Elderly (search for similar items in EconPapers)
JEL-codes: D14 G11 G22 H55 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (21)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:113:y:2014:i:2:p:202-214

DOI: 10.1016/j.jfineco.2014.04.006

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