Mental Accounting in Portfolio Choice: Evidence from a Flypaper Effect
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CitationChoi, 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.
AbstractConsistent 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.
Citable link to this pagehttp://nrs.harvard.edu/urn-3:HUL.InstRepos:4686774
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