Irina Stefanescu is an economist at the Federal Reserve Board in Washington D.C. She formerly taught finance at Indiana University, Kelley School of Business. She studies corporate pension plans and their relationship with sponsors. More recently, her research focused on 401(k) plans and conflicts of interest with various service providers. Her paper on “How corporate pension plans affect capital structure decisions” received the Wharton Research Data Services (WRDS) Award, while more recently another paper received the Best Paper award in the Financial Management journal. Her research was published in the Review of Financial Studies and Financial Management. She holds a Ph.D. in finance from University of North Carolina Chapel Hill.
It Pays to Set the Menu: Mutual Fund Investment Options in 401(K) Plans
by Irina Stefanescu
This paper investigates whether mutual fund families acting as service providers in 401(k) plans display favoritism toward their own funds. Using a hand-collected data set on retirement investment options, we show that poorly performing funds are less likely to be removed from and more likely to be added to a 401(k) menu if they are affiliated with the plan trustee. We find no evidence that plan participants undo this affiliation bias through their investment choices. Finally, the subsequent performance of poorly performing affiliated funds indicates that these trustee decisions are not information driven.
Kosali Simon, Ph.D. is a health economist, a Professor in the School of Public and Environmental Affairs (SPEA) at Indiana University, and a Research Associate of the National Bureau of Economic Research (NBER). Prior to joining SPEA in 2010, she was an Associate Professor at Cornell University. At SPEA she teaches classes in health economics and health policy at graduate and undergraduate levels. Her primary research area is economic analysis of health insurance and health care policy, and her work appears in economics and policy journals. She is the 2007 recipient of the John D. Thompson Prize from the Association of University Programs in Health Administration for contributions to health services research. Her research has been supported by the National Institutes of Health and the Robert Wood Johnson Foundation, among other sources. She is a Board Member of the American Society of Health Economists (ASHEcon) and the American Economic Association Committee on the Status of Women in Economics (CSWEP) where she coordinates the national mentoring program for junior female economists. She serves as the health Co-editor for the Journal of Policy Analysis and Management, an Associate Editor of Health Economics, an editorial board member of the American Journal of Health Economics, a member of the National Advisory Council for the Robert Wood Johnson Foundation Health Policy Fellowship program, and an Affiliated Scholar of the Urban Institute. She received her Ph.D. in Economics from the University of Maryland at College Park.
Professor Krische teaches financial accounting and financial statement analysis. Her research in judgment and decision making applies experimental and archival-empirical methods to investigate the use of financial information by investors and analysts. Susan’s research has been published in top academic journals including The Accounting Review, Contemporary Accounting Research, the Journal of Finance, and the Journal of Accounting Research. She has received several honors, including the American Accounting Association Competitive Manuscript Award. She currently serves as an Editor for Contemporary Accounting Research and is on the Editorial Boards of The Accounting Review and Behavioral Research in Accounting. Susan was previously on the faculty at the University of Illinois, and has served as an Academic Fellow with the Office of the Chief Accountant at the U.S. Securities and Exchange Commission. She earned her doctorate from Cornell University, has taught at the University of Waterloo (Canada), and has worked in public accounting with Ernst & Young (Clarkson Gordon).
Behavioral research in financial accounting often aims to address issues relevant to individual, nonprofessional investors, citing the importance of individual investors to capital markets or regulators’ concerns for the “average” investor. Nevertheless, many such studies utilize convenience samples of graduate business student participants in their experiments. This research analyzes a relatively large sample of participants recruited from Amazon’s Mechanical Turk platform (n>2,000) in order to assess how the broader range of investors’ numerical skills can impact extant accounting research results. Because we know relatively little about the characteristics of the individual investor, this research begins by examining investors’ demographic characteristics and numerical skills relative to non-investors, benchmarked against national samples of financial capability skills in the United States. A set of three extant financial accounting research experiments are then replicated. Results show that investors with higher numerical skills are more sensitive to others’ incentives and are more likely to incorporate that understanding into their judgments than are investors with lower numerical skills or non-investors. These findings suggest that limiting the pool of participants in the original research increases the power of the original statistical tests, and emphasizes the need for careful consideration of the potential match between the applied theory and the population of interest in empirical research.
Wilbert van der Klaauw is a Senior Vice President in Research and Director of the Center for Microeconomic Data. He is a labor economist and applied econometrician whose research interests include the study of life cycle labor supply and occupational choice decisions, household financial behavior and expectations, educational investment and productivity, and econometric approaches to program evaluation. Prior to joining the New York Fed, Dr. van der Klaauw was a Professor at UNC-Chapel Hill and Assistant Professor at New York University. He holds a Ph.D. from Brown University.
Inflation Expectations and Behavior: Do Survey Respondents Act on Their Beliefs? by Wilbert van der Klaauw.
We compare the inflation expectations reported by consumers in a survey with their behavior in a financially incentivized investment experiment. The survey is found to be informative in the sense that the beliefs reported by the respondents are correlated with their choices in the experiment. More importantly, we find evidence that most respondents act on their inflation expectations, showing patterns consistent with economic theory. Respondents whose behavior cannot be rationalized tend to have lower education, numeracy, and financial literacy. These findings help confirm the relevance of inflation expectations surveys and provide support to the micro-foundations of modern macroeconomic models.
The Price is Right: Updating Inflation Expectations in a Randomized Price Information Experiment by Wilbert van der Klaauw
Understanding the formation of consumer inflation expectations is considered crucial for monetary policy. Using a unique “information” experiment embedded in a survey, this paper investigates how consumers’ inflation expectations respond to new information. We elicit respondents’ expectations for future inflation before and after providing a random subset of respondents with factual information that may affect their expectations. This design creates unique panel data that allow us to identify causal effects of new information. We find that respondents, on average, update their expectations in response to (certain types of) provided information, and do so sensibly, in a manner consistent with Bayesian updating—with revisions systematically related to the strength of the information signal and uncertainty of baseline inflation expectations. Furthermore, we present evidence that baseline inflation expectations are right-skewed, and that consumers in the high-expectation right tail are relatively under-informed about objective inflation-relevant facts. As a result of information provision, however, the distribution of inflation expectations converges toward its center and cross-sectional disagreement declines. We also document heterogeneous information- processing by gender, and present suggestive evidence of respondents forecasting under asymmetric loss. Overall, our results provide support for expectation-formation models in which agents form expectations rationally but face information constraints. We discuss implications of our results for monetary policy and for macro-economic modeling.
Beth Akers is a fellow in the Brookings Institution’s Brown Center on Education Policy. She is an expert on the economics of education, with a focus on higher education policy. Akers’s recent writing has been on the topics of student loan debt, information in higher education, and extended time-to-degree. She previously held the position of staff economist with the President’s Council of Economic Advisors, where she worked on federal student lending policy as well as other education and labor issues. Akers received a B.S. in Mathematics and Economics from SUNY Albany and a Ph.D. in Economics from Columbia University. She is often cited by major media outlets and has briefed policy makers on the topic of student loans.
Alvaro Mezza is an economist at the Federal Reserve Board. He works at the Consumer Finance Section in the Research & Statistics Department. Before joining the Board in 2011, he pursued his Ph.D. in Economics at UCLA. Previously, he worked as a Research Assistant in the Research Department at the Inter-American Development Bank in Washington, D.C., and obtained his undergraduate degree in Economics from the University of La Plata, Buenos Aires, Argentina. One of his research interests is student loans. He is currently investigating who defaults on student loans and the effect of student loans on home ownership. His other research interests are consumer credit, human capital accumulation, and applied microeconomics.
John B. Shoven is the Trione Director of the Stanford Institute for Economic Policy Research and the Charles R. Schwab Professor of Economics at Stanford. He is also a Senior Fellow at the Hoover Institution and a Research Associate of the National Bureau of Economic Research. He specializes in public finance and corporate finance and has published on Social Security, health economics, corporate and personal taxation, mutual funds, pension plans, economic demography and applied general equilibrium economics. His books include The Real Deal: The History and Future of Social Security, Yale University Press, 1999, and The Evolving Pension System, Brookings Institution Press, 2005. His most recent book is co-authored with former Secretary of State and the Treasury George Shultz and deals with both Social Security and health care reform in the U.S. (Putting Our House in Order: A Guide to Social Security and Health Care Reform, W.W. Norton, 2008). He also recently published a research paper on new ways of measuring age (“New Age Thinking: Alternative Ways of Measuring Age, Their Relationship to Labor Force Participation, Government Policies and GDP,” NBER Working Paper No. 13476. October 2007). His journal publications appear in such places as the American Economic Review, Journal of Economic Perspectives, and the Journal of Public Economics. In total, he has published more than one hundred professional articles and twenty books.
Professor Shoven is a Fellow of the American Academy of Arts and Sciences, a recipient of the Paul A. Samuelson Award for Outstanding Scholarly Writing on Lifelong Financial Security, and an award winning teacher at Stanford. He received his Ph.D. in Economics from Yale University in 1973 and has been associated with Stanford ever since. He was Dean of Humanities and Sciences from 1993 to 1998. He is Chairman of the Board of Board of Cadence Design Systems and serves on the boards of American Century Funds, Exponent, Inc., and Financial Engines, Inc.
Trying the Impossible—Financing 30-Year retirements with 40-Year Careers: A Discussion of Social Security and Retirement Policy by John B. Shoven.
This talk will take two parts. The first part will deal with the need to adjust retirement institutions for longer lifetimes. The talk will first document how much the length of remaining life has increased for 65-year-olds over the past sixty years. I will then briefly discuss several policy changes that seem promising in encouraging people to work longer. The nature of these policy changes is to remove the current hidden early retirement incentives in existing programs. The second part of the talk has the separate title, Efficient Retirement Design: Combining Private Assets and Social Security to Maximize Retirement Resources. Here I develop the idea of using 401(k) assets and other private assets to finance a deferral of Social Security rather than to finance a supplement to Social Security. The return to Social Security deferral is an outlier in today’s financial markets. This redesign in the use of private defined contribution assets has the potential to add between $100,000 to $200,000 to lifetime consumption relative to using the assets to buy a conventional annuity.
George Washington University School of Business
Duquès Hall, Room 652
George Washington University School of Business
Duquès Hall, Room 652
George Washington University School of Business
Duquès Hall, Room 652
George Washington University School of Business
Duquès Hall, Room 652
George Washington University School of Business
Duquès Hall, Room 652
George Washington University School of Business
Duques Hall, Room 652