TY  - JOUR
AU  - Brown,Jeffrey R.
AU  - Liang,Nellie
AU  - Weisbenner,Scott
TI  - Individual Account Investment Options and Portfolio Choice: Behavioral Lessons from 401(k) Plans
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13169
PY  - 2007
Y2  - June 2007
UR  - http://www.nber.org/papers/w13169
L1  - http://www.nber.org/papers/w13169.pdf
N1  - Author contact info:
Jeffrey Brown
Department of Finance
University of Illinois at Urbana-Champaign
340 Wohlers Hall, MC-706
1206 South Sixth Street
Champaign, IL  61820-9080
Tel: 217/333-3322
E-Mail: brownjr@uiuc.edu

Nellie Liang
Federal Reserve Board
20th and Constitution Ave NW
Washington, DC 20551
E-Mail: nliang@frb.gov

Scott Weisbenner
University of Illinois at Urbana-Champaign
Department of Finance
340 Wohlers Hall, MC-706
1206 South Sixth Street
Champaign, IL  61820
Tel: 217/333-0872
Fax: 217/244-9867
E-Mail: weisbenn@uiuc.edu
AB  - This paper examines how the menu of investment options made available to workers in defined contribution plans influences portfolio choice.  Using unique panel data of 401(k) plans in the U.S., we present three principle findings.  First, we show that the share of investment options in a particular asset class (i.e., company stock, equities, fixed income, and balanced funds) has a significant effect on aggregate participant portfolio allocations across these asset classes.  Second, we document that the vast majority of the new funds added to 401(k) plans are high-cost actively managed equity funds, as opposed to lower-cost equity index funds.  Third, because the average share of assets invested in low-cost equity index funds declines with an increase in the number of options, average portfolio expenses increase and average portfolio performance is thus depressed.  All of these findings are obtained from a panel data set, enabling us to control for heterogeneity in the investment preferences of workers across firms and across time.
ER  -