The cost of owning employer stocksLessons from Taiwan

The

cost of owning employer stocks

Lessons from Taiwan

Lee

Yi-Tsung

Lee, Yi-Tsung

Author

Liu

Yu-Jane

Liu, Yu-Jane

Author

Zhu

Ning

Zhu, Ning

Author

text

working paper

Chestnut Hill, Mass. Center for Retirement Research at Boston College20072007monographic

Chestnut Hill, Mass.

Center for Retirement Research at Boston College

2007

monographic

Englisheng

English

eng

electronicapplication/pdfborn digital

electronic

application/pdf

born digital

Using data on all employees at listed companies in Taiwan, we find that the bias toward employer stocks is generic to individual investor decision-making, but not limited to retirement plans. 71 percent of sample employees invest in employer stocks and the employer stocks make up on average 47 percent of employee equity portfolios. The under-diversification resulting from the bias toward employer stocks is highly costly. Holding current portfolio risk constant, employees forego 4.89 percent per annum in raw returns by investing in employer stocks, which represents 39.74 percent of their average 1998 salary income. Our findings have important implications for social security reform and retirement account management.

Yi-Tsung Lee, Yu-Jane Liu, and Ning Zhu.

CRR WP2007-24

CRR WP

2007-24

http://crr.bc.edu/images/stories/Working_Papers/wp_2007-24.pdf

MChBEnglisheng

MChB

Englisheng

English

eng