An analysis of how individuals react to market returns in one 401(k) plan

An analysis of how individuals react to market returns in one 401(k) plan

An

analysis of how individuals react to market returns in one 401(k) plan

Agnew

Julie

Agnew, Julie

Author

Author

text

working paper

Chestnut Hill, Mass. Center for Retirement Research at Boston College20042004monographic

Chestnut Hill, Mass.

Chestnut Hill, Mass.

Center for Retirement Research at Boston College

2004

2004

monographic

Englisheng

English

eng

electronicapplication/pdfborn digital

electronic

application/pdf

born digital

Using a unique dataset of 401(k) trades, this paper's results suggest that in most cases only equity fund outflows, not inflows, are significantly related to their own past fund returns. Also, the strong correlation between flows and lagged returns is only significant when fund returns are extremely low. Furthermore, most trades (48 percent) are either from equities to risk-free assets, or vice versa. Finally, it is only the flows from equities to GICs that show a strong correlation with one-day lagged returns. This suggests that many trades are "flights to safety" not return chasing.

Julie Agnew.

CRR WP2004-13

CRR WP2004-13

CRR WP

2004-13

http://crr.bc.edu/images/stories/Working_Papers/wp_2004-13.pdf

MChBEnglisheng

MChB

Englisheng

English

eng