Trading Behavior in 401(k) Plans

Published: 2005
Project ID: UM05-S2


Relatively little research has been done on trading patterns of participants in 401(k) plans, despite their importance in the US retirement arena. This paper initiates an investigation into a new database covering in 1,530 defined contribution (401(k) retirement plans covering over one million active participants. Our early results suggest that trading activity in 401(k) accounts is very limited: only one-fifth of participants ever reshuffled their portfolios over a two-year period. We also find that key demographic factors are strongly associated with trading activities: that is, traders tend to be older, wealthier, more highly paid, male employees with longer plan tenure. Finally, we offer some initial insights suggesting that plan design factors are significantly associated with 401(k) participant trading behavior.



Ludmila Rovba