Yamaguchi, Takeshi

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  • Publication
    Default, Framing and Spillover Effects: The Case of Lifecycle Funds in 401(k) Plans
    (2009-06-01) Mitchell, Olivia S; Mottola, Gary R; Utkus, Stephen P; Yamaguchi, Takeshi
    Important behavioral factors such as default and framing effects are increasingly being employed to optimize decision-making in a variety of settings, including individually-directed retirement plans. Yet such approaches may have unintended “spillover” effects, as we show with regard to the introduction of lifecycle funds in U.S. 401(k) plans. As anticipated, lifecycle funds do reshape individual portfolio choices through large default and framing effects. But unexpectedly, they also create a new class of investors which holds these funds as part of more complex portfolios. Our results are directly relevant to those interested in retirement plan design and retirement security; they also highlight the importance of assessing such spillover effects in other consequential settings where techniques drawn from behavioral economics may be employed.
  • Publication
    Winners and Losers: 401(k) Trading and Portfolio Performance
    (2006-11-01) Yamaguchi, Takeshi; Mitchell, Olivia S; Mottola, Gary R; Utkus, Stephen P
    Few previous studies have explored how individuals manage their defined contribution (DC) pension plan assets, though these plans constitute an increasingly important component of retirement wealth. Using a valuable new dataset on over one million active 401(k) plan participants in a wide range of plans, we assess the impact of trading on investment performance in DC plans. We find that, in aggregate, the risk-adjusted returns of traders are no different than those of nontraders. Yet certain types of trading such as periodic rebalancing are beneficial, while high-turnover trading is costly. Interestingly, those who hold only balanced or lifecycle funds, whom we call passive rebalancers, earn the highest risk-adjusted returns. These findings should interest participants in such plans, fiduciaries responsible for designing DC pensions, and regulators of the retirement saving environment.
  • Publication
    The Inattentive Participant: Portfolio Trading Behavior in 401(k) Plans
    (2006-01-01) Mitchell, Olivia S; Mottola, Gary R; Utkus, Stephen P; Yamaguchi, Takeshi
    Most workers in defined contribution retirement plans are inattentive portfolio managers: only a few engage in any trading at all, and only a tiny minority trades actively. Using a rich new dataset on 1.2 million workers in over 1,500 plans, we find that most 401(k) plan participants are characterized by profound inertia. Almost all participants (80%) initiate no trades, and an additional 11% makes only a single trade, in a two-year period. Even among traders, portfolio turnover rates are one-third the rate of professional money managers. Those who trade in their 401(k) plans are more affluent older men, with higher incomes and longer job tenure. They tend to use the internet for 401(k) account access, hold a larger number of investment options, and are more likely to hold active equity funds rather than index or lifecycle funds. Some plan features, including offering own-employer stock, also raise trading levels.
  • Publication
    The Dynamics of Lifecycle Investing in 401(k) Plans
    (2008-01-01) Mitchell, Olivia S; Mottola, Gary R; Utkus, Stephen P; Yamaguchi, Takeshi
    The introduction of lifecycle funds into 401(k) plans offers a rich environment in which to assess workers’ portfolio allocation decisions. Consistent with behavioral models, employer design decisions strongly influence lifecycle adoption behavior while fundamentally altering portfolio characteristics, both in the cross-section and longitudinally. Yet there are also elements of rational choice by new employees, as well as choice constrained by information costs among workers with low literacy characteristics. We conclude that recent legislation encouraging riskier 401(k) portfolios will modify investment patterns, with the rate of change varying according to whether behavioral or rational elements dominate in a given setting.
  • Publication
    The Dynamics of Lifecycle Investing in 401(k) Plans
    (2008-08-01) Mitchell, Olivia S; Mottola, Gary; Yamaguchi, Takeshi; Utkus, Stephen
    The introduction of lifecycle funds into 401(k) plans offers a rich environment in which to assess workers’ portfolio allocation decisions. Consistent with behavioral models, employer design decisions strongly influence lifecycle adoption behavior while fundamentally altering portfolio characteristics, both in the cross-section and longitudinally. Yet there are also elements of rational choice by new employees, as well as choice constrained by information costs among workers with low literacy characteristics. We conclude that recent legislation encouraging riskier 401(k) portfolios will modify investment patterns, with the rate of change varying according to whether behavioral or rational elements dominate in a given setting.