Defined Contribution Pension Plans: Sticky or Discerning Money?

Clemens Sialm, Laura Starks and Hanjiang Zhang
Additional contact information
Laura Starks: Stanford University
Hanjiang Zhang: Stanford University

No 13-022, Discussion Papers from Stanford Institute for Economic Policy Research

Abstract: 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. Yet, the participants’ inertia could be offset by the 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 that derive from DC assets are more volatile and exhibit more performance sensitivity than non-DC flows, primarily due to the adjustments of the investment options by the plan sponsors. Thus, DC retirement money is less sticky and more discerning.

Date: 2014-01
New Economics Papers: this item is included in nep-age, nep-dem and nep-sog
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Journal Article: Defined Contribution Pension Plans: Sticky or Discerning Money? (2015)
Working Paper: Defined Contribution Pension Plans: Sticky or Discerning Money? (2013)
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