$100 Bills on the Sidewalk: Violations of No-Arbitrage in 401(k) Accounts

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$100 Bills on the Sidewalk: Violations of No-Arbitrage in 401(k) Accounts

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Title: $100 Bills on the Sidewalk: Violations of No-Arbitrage in 401(k) Accounts
Author: Choi, James J.; Madrian, Brigitte; Laibson, David I.

Note: Order does not necessarily reflect citation order of authors.

Citation: Choi, James J., David Laibson, and Brigitte Madrian. 2011. $100 Bills on the Sidewalk: Violations of No-Arbitrage in 401(k) Accounts. The Review of Economics and Statistics 93(3): 748-763.
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Abstract: We identify employees at seven companies whose 401(k) investment choices are dominated because they are contributing less than the employer matching contribution threshold despite being vested in their match and being able to make penalty-free 401(k) withdrawals for any reason because they are older than 59½. At the average firm, 36% of match-eligible employees over age 59½ forgo arbitrage profits that average 1.6% of their annual pay, or $507. A survey educating employees about the free lunch they are forgoing raised contribution rates by a statistically insignificant 0.67% of income among those completing the survey.
Published Version: http://dx.doi.org/10.1162/REST_a_00100
Terms of Use: This article is made available under the terms and conditions applicable to Other Posted Material, as set forth at http://nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of-use#LAA
Citable link to this page: http://nrs.harvard.edu/urn-3:HUL.InstRepos:9647368
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