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Which individuals make active investment decisions in the new Swedish pension system?

Author

Listed:
  • Engström, Stefan

    (Dept. of Finance, Stockholm School of Economics)

  • Westerberg, Anna

    (National Social Insurance Board)

Abstract

This paper provides a detailed examination of individuals' active participation in a new public and mandatory defined contribution pension system. The new pension system was launched in the fall of 2000 and entitles Sweden's workforce of 4.4 million individuals to invest part of their individual pension account in mutual funds. Our findings show that the system is associated with a reversed investment behavior compared with studies of 401(k) plans; that is, individuals tend to make their own investment decisions. Contrary to U.S studies, we also find that women and younger individuals are more likely than men and older individuals to make an active investment decision.

Suggested Citation

  • Engström, Stefan & Westerberg, Anna, 2003. "Which individuals make active investment decisions in the new Swedish pension system?," SSE/EFI Working Paper Series in Economics and Finance 527, Stockholm School of Economics, revised 12 Aug 2003.
    • Handle: RePEc:hhs:hastef:0527
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    References listed on IDEAS

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    Cited by:

    1. Saime S KAYAM & Merih CELİKTOPUZ & Mehmet KORAY PARKIN, 2013. "Features That Influence The Exit Decision From The Private Pension System In Turkey," Journal of Advanced Studies in Finance, ASERS Publishing, vol. 4(2), pages 145-155.
    2. Christelis, Dimitris & Jappelli, Tullio & Padula, Mario, 2010. "Cognitive abilities and portfolio choice," European Economic Review, Elsevier, vol. 54(1), pages 18-38, January.
    3. Tubetov, Dulat & Maart, Syster Christin & Musshoff, Oliver, 2012. "Comparison of the investment behavior of Kazakhstani and German farmers: An experimental approach," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124650, Agricultural and Applied Economics Association.
    4. Hagen, Johannes, 2013. "A History of the Swedish Pension System," Working Paper Series, Center for Fiscal Studies 2013:7, Uppsala University, Department of Economics.
    5. Karlsson, Anders & Norden, Lars, 2007. "Home sweet home: Home bias and international diversification among individual investors," Journal of Banking & Finance, Elsevier, vol. 31(2), pages 317-333, February.
    6. van Dalen, Hendrik Peter & Henkens, Kene, 2018. "Do people really want freedom of choice? : Assessing preferences of pension holders," Other publications TiSEM 448e8a93-9ded-401f-9da0-7, Tilburg University, School of Economics and Management.
    7. J rg Neugschwender, 2015. "Pension Institutions and Income Inequality across European Societies: Denmark, Germany, Sweden, and the United Kingdom," LIS Working papers 627, LIS Cross-National Data Center in Luxembourg.
    8. Craig Speelman & Marilyn Clark-Murphy & Paul Gerrans, 2013. "Decision Making Clusters in Retirement Savings: Gender Differences Dominate," Journal of Family and Economic Issues, Springer, vol. 34(3), pages 329-339, September.
    9. Massa, Massimo & Simonov, Andrei & Stenkrona, Anders, 2015. "Style representation and portfolio choice," Journal of Financial Markets, Elsevier, vol. 23(C), pages 1-25.
    10. Tubetov, Dulat & Maart, Syster Christin & Musshoff, Oliver, 2012. "Experimental examination of land investment decisions with volatile returns A comparison between Kazakhstani and German farmers," 123rd Seminar, February 23-24, 2012, Dublin, Ireland 122454, European Association of Agricultural Economists.
    11. Hagen, Johannes & Malisa, Amedeus, 2022. "Financial fraud and individual investment behavior," Journal of Economic Behavior & Organization, Elsevier, vol. 203(C), pages 593-626.
    12. Hedesstrom, Ted Martin & Svedsater, Henrik & Garling, Tommy, 2007. "Determinants of the use of heuristic choice rules in the Swedish Premium Pension Scheme: An Internet-based survey," Journal of Economic Psychology, Elsevier, vol. 28(1), pages 113-126, January.
    13. McQueen, Grant & Stenkrona, Anders, 2012. "The home-institution bias," Journal of Banking & Finance, Elsevier, vol. 36(6), pages 1627-1638.
    14. Engström, Stefan & Westerberg, Anna, 2004. "Information Costs and Mutual Fund Flows," SSE/EFI Working Paper Series in Economics and Finance 555, Stockholm School of Economics.
    15. Säve-Söderbergh, Jenny, 2005. "Who is Willing to Let Ethics Guide His Economic Decision-Making? Evidence from Individual Investments in Ethical Funds," Working Paper Series 7/2005, Stockholm University, Swedish Institute for Social Research.
    16. Yilmaz Yildiz & Mehmet Baha Karan & Seyma Bayrak Salantur, 2017. "An Investigation on Early Voluntary Withdrawals from Individual Retirement Accounts: An Empirical Study on an Emerging Market," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 42(4), pages 732-756, October.
    17. Marilyn Clark-Murphy & Craig P. Speelman, 2007. "Decision Making Clusters in Retirement Savings: Preliminary Findings," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 10(2), pages 115-127.

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    More about this item

    Keywords

    Mutual funds; portfolio choice; pension system; status quo bias;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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