Mental Accounting in Portfolio Choice: Evidence from a Flypaper Effect

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Mental Accounting in Portfolio Choice: Evidence from a Flypaper Effect

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

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Citation: Choi, James J., David I. Laibson, and Brigitte C. Madrian. 2009. Mental accounting in portfolio choice: Evidence from a flypaper effect. American Economic Review 99(5): 2085-2095.
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Abstract: 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 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.
Published Version: doi:10.1257/aer.99.5.2085
Other Sources: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1037175
Terms of Use: This article is made available under the terms and conditions applicable to Open Access Policy Articles, as set forth at http://nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of-use#OAP
Citable link to this page: http://nrs.harvard.edu/urn-3:HUL.InstRepos:4686774

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  • FAS Scholarly Articles [7078]
    Peer reviewed scholarly articles from the Faculty of Arts and Sciences of Harvard University
 
 

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