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Do Behavioral Biases Vary across Individuals? Evidence from Individual Level 401(k) Data

Published online by Cambridge University Press:  06 April 2009

Julie R. Agnew
Julie R. Agnew
Affiliation:
julie.agnew@mason.wm.edu, The College of William and Mary, Mason School of Business Administration, PO Box 8795, Williamsburg, VA 23187.
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Abstract

This paper investigates whether some individuals are prone to behavioral biases in their 401(k) investments. Using demographic data and allocation information for over 73,000 employees, I examine two allocation biases and a participation bias. The findings suggest that higher salaried employees tend to make significantly better choices. Participants who earn $100, 000 hold 12. 7% less in company stock, are 3% less likely to follow the framing 1/n heuristic, and are 37.7% more likely to participate than those earning $46, 000. Women make better choices in two of the three cases and I find evidence of mental accounting.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 41 , Issue 4 , December 2006 , pp. 939 - 962
Copyright
Copyright © School of Business Administration, University of Washington 2006

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