NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Defined Contribution Pension Plans: Sticky or Discerning Money?

Clemens Sialm, Laura Starks, Hanjiang Zhang

NBER Working Paper No. 19569
Issued in October 2013
NBER Program(s):   AG   AP   CF   PE

Participants in defined contribution (DC) retirement plans rarely adjust their portfolio allocations, suggesting that their investment choices and consequent money flows are sticky and not discerning. Yet, the participants’ inertia could be offset by the DC plan sponsors, who adjust the plan’s investment options. We examine these countervailing influences on flows into U.S. mutual funds. We find that flows into funds that derive from DC assets are more volatile and exhibit more performance sensitivity than non-DC flows, primarily due to the adjustments of the investment options by the plan sponsors. Thus, DC retirement money is less sticky and more discerning.

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