Mental Accounting in Portfolio Choice: Evidence from a Flypaper Effect / James J. Choi, David Laibson, Brigitte C. Madrian.

Format:

Book

Author/Creator:

Choi, James J.

Contributor:

National Bureau of Economic Research.

Laibson, David.

Madrian, Brigitte C.

Series:

Working Paper Series (National Bureau of Economic Research) no. w13656.

NBER working paper series no. w13656

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Mental Accounting in Portfolio Choice

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2007.

Summary:

Consistent with mental accounting, we document that investors sometimes choose the asset allocation for one account without considering the asset allocation of their other accounts. The setting is a firm that changed its 401(k) matching rules. Initially, 401(k) enrollees chose the allocation of their own contributions, but the firm chose the match allocation. These enrollees ignored the match allocation when choosing their own-contribution allocation. In the second regime, enrollees simultaneously selected both accounts' allocations, leading them to mentally integrate the two. Own-contribution allocations before the rule change equal the combined own- and match-contribution allocations afterwards, whereas combined allocations differ sharply across regimes.

Notes:

Print version record

November 2007.