TY - RPRT T1 - Investment Decisions in Retirement: The Role of Subjective Expectations Y1 - 2012 A1 - Marco Angrisani A1 - Michael D Hurd A1 - Erik Meijer KW - Net Worth and Assets KW - Pensions AB - The rapid transition from defined benefit (DB) pension plans to defined contribution (DC) plans has a potential benefit of offering pension holders greater control over how their pension accumulations are invested. If pension holders are willing to take some risk, investments in the stock market could increase their economic preparation for retirement, and, indeed, economic theory as well as the typical advice of financial advisors calls for stock market investments. Yet, the rate of stock holding is much below what theory suggests it should be, undoing any benefit associated with the greater control coming from DC plans. The leading explanations for this under-investing include excessive risk aversion, costs of entry, and misperceptions about possible returns in the stock market. We show that excessive risk aversion is not able to account for the low fraction of stock holding. However, a model with heterogeneous subjective expectations about stock market returns is able to account for low stock market participation, and tracks the share of risky assets conditional on participation reasonably well. Based on the model with subjective expectations, we estimate a welfare loss of up to 12 compared to investment under rational expectations, if actual returns follow the same distribution as in the past 50 years. The policy implication is that there is considerable scope for welfare improvement as a result of consumer education regarding stock market returns. However, the welfare loss is much smaller if individuals are not very risk averse or if actual returns follow the same distribution as in the past 10 years PB - Ann Arbor, The University of Michigan UR - http://www.mrrc.isr.umich.edu/publications/publications_download.cfm?pid=865 U4 - pension Plans/defined benefit plans/defined contribution pension plans/investment Decisions/investment Decisions/stock market ER - TY - CHAP T1 - Predictors of Mortality among the Elderly T2 - Themes in the Economics of Aging Y1 - 2001 A1 - Michael D Hurd A1 - Daniel McFadden A1 - Merrill, Angela ED - David A Wise KW - Demographics KW - Expectations KW - Health Conditions and Status KW - Net Worth and Assets AB - This paper examines the quantitative importance of some predictors of mortality among the population aged 70 and over. As expected, this research confirms that socioeconomic status is related to mortality. This relationship is strong at younger ages and appears to weaken as the cohort gets older. The 13 health indicators are also strong predictors of mortality. Results also show that subjective probabilities of survival predict mortality and remain strong predictors even after controlling for socioeconomic indicators and health conditions. JF - Themes in the Economics of Aging PB - Univ. of Chicago Press CY - Chicago UR - https://www.nber.org/papers/w7440 N1 - ProCite field 8 : ed. U4 - Basic Demographics/Economic Status/Health Status/Subjective Probabilities of Survival/Mortality Rates between waves 1 and 2 of the AHEAD JO - Predictors of Mortality among the Elderly ER - TY - CHAP T1 - The Impact of Demographics on Housing and Nonhousing Wealth in the United States T2 - The Economic Effects of Aging in the United States and Japan Y1 - 1997 A1 - Daniel McFadden A1 - Hoynes, Hilary ED - Naohiro Yashiro ED - Michael D Hurd KW - Demographics KW - Housing KW - Net Worth and Assets JF - The Economic Effects of Aging in the United States and Japan PB - University of Chicago Press CY - Chicago, IL N1 - ProCite field 8 : eds. U4 - Housing Equity/Wealth/Demographics JO - The Impact of Demographics on Housing and Nonhousing Wealth in the United States ER -