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Myopic Loss Aversion and the Equity Premium Puzzle
The equity premium puzzle, first documented by Mehra and Prescott, refers to the empirical fact that stocks have greatly outperformed bonds over the last century. As Mehra and Prescott point out, it
Excessive Extrapolation and the Allocation of 401(k) Accounts to Company Stock
About a third of the assets in large retirement savings plans are invested in company stock, and about a quarter of the "discretionary" contributions are invested in company stock. From a
Naive Diversification Strategies in Defined Contribution Saving Plans
There is a worldwide trend toward defined contribution saving plans and growing interest in privatized Social Security plans. In both environments, individuals are given some responsibility to make
Save More Tomorrow™: Using Behavioral Economics to Increase Employee Saving
As firms switch from defined‐benefit plans to defined‐contribution plans, employees bear more responsibility for making decisions about how much to save. The employees who fail to join the plan or
Do Changes in Dividends Signal the Future or the Past
Many dividend theories imply that changes in dividends have information content about the future earnings of the firm. The authors investigate this implication and find only limited support for it.
Heuristics and Biases in Retirement Savings Behavior
Standard economic theories of saving implicitly assume that households have the cognitive ability to solve the relevant optimization problem and the willpower to execute the optimal plan. Both of the
Risk Aversion Or Myopia? Choices in Repeated Gambles and Retirement Investments
We study how decision makers choose when faced with multiple plays of a gamble or investment. When evaluating multiple plays of a simple mixed gamble, a chance to win x or lose y, subjects show a
Dividend Changes Do Not Signal Changes in Future Profitability
One of the most important predictions of the dividend-signaling hypothesis is that dividend changes are positively correlated with future changes in profitability and earnings. Contrary to this
Should Governments Invest More in Nudging?
It is concluded that nudging is a valuable approach that should be used more often in conjunction with traditional policies, but more calculations are needed to determine the relative effectiveness of nudging.
How Much is Investor Autonomy Worth?
There is a worldwide trend towards defined contribution savings plans, where investors are often able to select their own portfolios. How much is this freedom of choice worth? We present retirement