Who Is Internationally Diversified? Evidence from the 401(k) Plans of 296 Firms

95 Pages Posted: 8 Jul 2014 Last revised: 12 Apr 2016

See all articles by Geert Bekaert

Geert Bekaert

Columbia Business School - Finance and Economics

Kenton Hoyem

Financial Engines, Inc.

Wei-Yin Hu

Financial Engines, Inc.

Enrichetta Ravina

Federal Reserve Bank of Chicago; Center for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Multiple version iconThere are 2 versions of this paper

Date Written: April 7, 2016

Abstract

Drawing on a novel database of the 401(k) plans of 296 firms, we examine the international equity allocations of 3.8 million individuals over the period 2005-2011. We find enormous cross-individual variation, ranging from zero to more than 75%, and strong cohort effects, with younger cohorts investing more internationally than older ones, and each cohort investing more internationally over time. Access to financial advice, lower fees, and more international fund choices are associated with higher international allocations, suggesting a role for plan design and policy. Education, financial literacy, and the fraction of foreign-born population in the ZIP code also have positive effects on international diversification, consistent with explanations based on familiarity bias and information barriers.

Keywords: International Diversification, Micro Data, 401(k) Plans

JEL Classification: G11; G15; G23

Suggested Citation

Bekaert, Geert and Hoyem, Kenton and Hu, Wei-Yin and Ravina, Enrichetta, Who Is Internationally Diversified? Evidence from the 401(k) Plans of 296 Firms (April 7, 2016). Netspar Discussion Paper No. 02/2014-025, Available at SSRN: https://ssrn.com/abstract=2463073 or http://dx.doi.org/10.2139/ssrn.2463073

Geert Bekaert

Columbia Business School - Finance and Economics ( email )

3022 Broadway
New York, NY 10027
United States

Kenton Hoyem

Financial Engines, Inc. ( email )

1804 Embarcadero Road
Palo Alto, CA 94303
United States

Wei-Yin Hu

Financial Engines, Inc. ( email )

1050 Enterprise Way, 3rd Floor
Sunnyvale, CA 94089
United States

Enrichetta Ravina (Contact Author)

Federal Reserve Bank of Chicago ( email )

230 South LaSalle Street
Chicago, IL 60604
United States

HOME PAGE: http://https://sites.google.com/view/eravina/research

Center for Economic Policy Research (CEPR) ( email )

33 Great Sutton Street
London
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
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Brussels
Belgium

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