Wharton Pension Research Council Working Papers

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Working Paper

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This paper explores whether social interactions influence investors’ decisions to hold equity and allocate their portfolios, in the context of defined contribution retirement savings accounts. Using a rich dataset of 401(k) plans, we provide empirical evidence that participants are influenced by their coworkers when they make equity investment decisions. Specifically, we show that individuals are likely to increase their risky share if their peers earned higher equity returns in the past period relative to average returns; they are also likely to decrease their risky share when past peer equity returns are strongly negative. These results are consistent with the limited attention hypothesis that people are more likely to pay attention to significant outcomes.

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Copyright/Permission Statement

All findings, interpretations, and conclusions of this paper represent the views of the authors and not those of the Wharton School or the Pension Research Council, The HSBC Business School, Vanguard, or any other institution with which the author may be affiliated. © 2011 Pension Research Council of the Wharton School of the University of Pennsylvania. All rights reserved.


The author acknowledges without implicating Olivia S. Mitchell, Alex Gelber, Itay Goldstein, Gary Mottola, Cynthia Pagliaro, Ning Tang, Steve Utkus, Jean Young, Yong Yu, seminar participants at the Wharton School and Lake Forest College for helpful comments. He is also grateful to Vanguard for providing recordkeeping data under restricted access conditions; to the Pension Research Council at the Wharton School, the Bradley Foundation, and the Wharton Entrepreneurship and Family Business Research Center for generous research support

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Economics Commons



Date Posted: 28 June 2019