Reducing the Complexity Costs of 401(k) Participation Through Quick Enrollment(TM)

The complexity of the retirement savings decision may overwhelm employees, encouraging procrastination and reducing 401(k) enrollment rates. We study a low-cost manipulation designed to simplify the 401(k) enrollment process. Employees are given the option to make a Quick Enrollment(TM) election to enroll in their 401(k) plan at a pre-selected contribution rate and asset allocation. By decoupling the participation decision from the savings rate and asset allocation decisions, the Quick Enrollment(TM) mechanism simplifies the savings plan decision process. We find that at one company, Quick Enrollment(TM) tripled 401(k) participation rates among new employees three months after hire. When Quick Enrollment(TM) was offered to previously hired non-participating employees at two firms, participation increased by 10 to 20 percentage points among those employees affected.

What Does Stock Ownership Breadth Measure?

Using holdings data on a representative sample of all Shanghai Stock Exchange investors, we show that increases in ownership breadth (the fraction of market participants who own a stock) predict low returns: highest change quintile stocks underperform lowest quintile stocks by 23% per year. Small retail investors drive this result. Retail ownership breadth increases appear to be correlated with overpricing. Among institutional investors, however, the opposite holds: Stocks in the top decile of wealth-weighted institutional breadth change outperform the bottom decile by 8% per year, consistent with prior work that interprets breadth as a measure of short-sales constraints.

Effect of Socio-Demographics, Health-Related Problems, and Family Structure on Chronic Absenteeism Among Children

Purpose/Background: From 5 to 7.5 million school children are chronically absent, defined as missing ≥15 days of school within a year. Students miss schools due to various reasons such as health, socioeconomic status, and environmental factors. We examined child’s health and behavior, family structure, and socio-demographics to understand chronic absenteeism. Materials & Methods: The population included children ages 6 to 17 years from the Medical Expenditure Panel Survey (MEPS) years 2008-2013. Multivariable logistic regressions were used to identify the risk factors of chronic absenteeism, adjusting for the complex sampling design. Results: Among socio-demographic variables, age ≥14 years, race/ethnicity, lower-income family, public health insurance, US-born, and speaking English at home were associated with chronic absenteeism. Asians, Mexican Hispanics, and blacks have lower chronic absenteeism than whites. Among health-related variables, children using an inhaler for asthma, having behavioral problems, and less healthy than other children were more likely to be chronically absent. Among family variables, a smaller family size was a risk factor for chronic absenteeism. Discussion/Conclusion: Asthma and behavioral problems were highly associated with chronic absenteeism. The identification of children at risk for chronic absenteeism will help the educational professionals identify the barriers to academic achievements and develop integrated educational interventions and policies to support disadvantaged children

Why Does the Law of One Price Fail? An Experiment on Index Mutual Funds

Experimental subjects allocate $10,000 across four S&P 500 index funds. Subject rewards depend on the chosen portfolio’s subsequent return. Because the investments are not actually intermediated by the fund companies, portfolio returns are unbundled from non-portfolio services. The optimal portfolio therefore invests 100% in the lowest-cost fund. Nonetheless, subjects overwhelmingly fail to minimize fees. When we make fees transparent and salient, portfolios shift towards cheaper funds, but fees are still not minimized. Instead, subjects place high weight on normatively irrelevant historical returns. Subjects who choose high-cost index funds are relatively much less confident about their asset allocation choices.

Mental Accounting in Portfolio Choice: Evidence from a Flypaper Effect

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.