A Study of the relationship between the efficiency of 401(k) Plan and plan characteristics

• Main Authors: Lin, Yuan-Chun, 林元駿
• Other Authors: Chen, Hong Yi
• Format: Others
• Language: en_US
• Published: 2019
• Online Access: http://ndltd.ncl.edu.tw/handle/4y462n

碩士 === 國立政治大學 === 財務管理學系 === 107 === This study tries to investigate whether the active investment strategy of 401(k) plans is more efficient than the passive investment strategy. Prior literature has documented some problems of behavioral bias in 401(k) plans. We argue that the existence of the behavioral bias will lead the irrational investment decision, and therefore a weak plan efficiency can be observed. We collect 2,688 401(k) plans and examine the relationship between the plan efficiency and plan characteristics. We empirically find that only 0.3% of plans can outperform market portfolios, indicating the active investment strategies of most 401(k) plans are not efficient. In addition, we find the plan efficiency is positively associated with the proportion of the company stock holding to total investments of a plan. However, the choice of trustees or the size of the investment menu has no significant effect on the plan efficiency.