Scandinavian Working Papers in Economics

SSE/EFI Working Paper Series in Economics and Finance,
Stockholm School of Economics

No 527: Which individuals make active investment decisions in the new Swedish pension system?

Stefan Engström () and Anna Westerberg ()
Additional contact information
Stefan Engström: Dept. of Finance, Stockholm School of Economics, Postal: Stockholm School of Economics, P.O. Box 6501, SE-113 83 Stockholm, Sweden
Anna Westerberg: 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.

Keywords: Mutual funds; portfolio choice; pension system; status quo bias

JEL-codes: G11; G23; H55

29 pages, First version: May 7, 2003. Revised: August 12, 2003. Earlier revisions: July 21, 2003.

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